Correlation Between Canopy Growth and IPG Photonics

Can any of the company-specific risk be diversified away by investing in both Canopy Growth 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 Canopy Growth and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canopy Growth Corp and IPG Photonics, you can compare the effects of market volatilities on Canopy Growth 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 Canopy Growth with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canopy Growth and IPG Photonics.

Diversification Opportunities for Canopy Growth and IPG Photonics

0.57

Correlation Coefficient

Canopy Growth  IPG Photonics

Very weak diversification

The 3 months correlation between Canopy and IPG is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Canopy Growth 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 Canopy Growth Corp 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 Canopy Growth i.e., Canopy Growth and IPG Photonics go up and down completely randomly.

Pair Corralation between Canopy Growth and IPG Photonics

Considering the 90-day investment horizon Canopy Growth Corp is expected to under-perform the IPG Photonics. In addition to that, Canopy Growth is 1.75 times more volatile than IPG Photonics. It trades about -0.35 of its total potential returns per unit of risk. IPG Photonics is currently generating about 0.06 per unit of volatility. If you would invest  7,633  in IPG Photonics on October 25, 2024 and sell it today you would earn a total of  147.00  from holding IPG Photonics or generate 1.93% return on investment over 90 days.

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

Canopy Growth Corp  vs.  IPG Photonics

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canopy Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

IPG Photonics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, IPG Photonics is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Canopy Growth and IPG Photonics

The main advantage of trading using opposite Canopy Growth and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canopy Growth 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 Canopy Growth Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.