Correlation Between Evolution Mining and IPG Photonics

Can any of the company-specific risk be diversified away by investing in both Evolution Mining and IPG Photonics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Evolution Mining and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Evolution Mining and IPG Photonics, you can compare the effects of market volatilities on Evolution Mining and IPG Photonics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Evolution Mining with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Mining and IPG Photonics.

Diversification Opportunities for Evolution Mining and IPG Photonics

-0.75

Correlation Coefficient

Evolution Mining  IPG Photonics

Pay attention - limited upside

The 3 months correlation between Evolution and IPG is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Evolution Mining is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Evolution Mining are associated (or correlated) with IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Evolution Mining i.e., Evolution Mining and IPG Photonics go up and down completely randomly.

Pair Corralation between Evolution Mining and IPG Photonics

Assuming the 90 days horizon Evolution Mining is expected to generate 1.71 times more return on investment than IPG Photonics. However, Evolution Mining is 1.71 times more volatile than IPG Photonics. It trades about 0.18 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.04 per unit of risk. If you would invest  300.00  in Evolution Mining on December 28, 2024 and sell it today you would earn a total of  149.00  from holding Evolution Mining or generate 49.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Evolution Mining  vs.  IPG Photonics

Evolution Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Evolution Mining reported solid returns over the last few months and may actually be approaching a breakup point.

IPG Photonics

Risk-Adjusted Performance

Very Weak

Over the last 90 days IPG Photonics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Evolution Mining and IPG Photonics

The main advantage of trading using opposite Evolution Mining and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution Mining position performs unexpectedly, IPG Photonics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IPG Photonics will offset losses from the drop in IPG Photonics' long position.

The idea behind Evolution Mining and IPG Photonics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.