Correlation Between Delta Air and IPG Photonics

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

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

Diversification Opportunities for Delta Air and IPG Photonics

0.52

Correlation Coefficient

Delta Air  IPG Photonics

Very weak diversification

The 3 months correlation between Delta and IPG is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Delta Air 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 Delta Air Lines 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 Delta Air i.e., Delta Air and IPG Photonics go up and down completely randomly.

Pair Corralation between Delta Air and IPG Photonics

Considering the 90-day investment horizon Delta Air Lines is expected to under-perform the IPG Photonics. In addition to that, Delta Air is 1.18 times more volatile than IPG Photonics. It trades about -0.13 of its total potential returns per unit of risk. IPG Photonics is currently generating about -0.08 per unit of volatility. If you would invest  7,641  in IPG Photonics on December 26, 2024 and sell it today you would lose (1,000.00) from holding IPG Photonics or give up 13.09% of portfolio value over 90 days.

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

Delta Air Lines  vs.  IPG Photonics

Delta Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Delta Air and IPG Photonics

The main advantage of trading using opposite Delta Air and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air 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 Delta Air Lines 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..