Correlation Between GrafTech International and Ideal Power

Can any of the company-specific risk be diversified away by investing in both GrafTech International and Ideal Power 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 GrafTech International and Ideal Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GrafTech International and Ideal Power, you can compare the effects of market volatilities on GrafTech International and Ideal Power 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 GrafTech International with a short position of Ideal Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of GrafTech International and Ideal Power.

Diversification Opportunities for GrafTech International and Ideal Power

-0.68

Correlation Coefficient

GrafTech International  Ideal Power

Excellent diversification

The 3 months correlation between GrafTech and Ideal is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding GrafTech International and Ideal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideal Power and GrafTech International 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 GrafTech International are associated (or correlated) with Ideal Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideal Power has no effect on the direction of GrafTech International i.e., GrafTech International and Ideal Power go up and down completely randomly.

Pair Corralation between GrafTech International and Ideal Power

Considering the 90-day investment horizon GrafTech International is expected to under-perform the Ideal Power. In addition to that, GrafTech International is 1.2 times more volatile than Ideal Power. It trades about -0.01 of its total potential returns per unit of risk. Ideal Power is currently generating about -0.01 per unit of volatility. If you would invest  1,114  in Ideal Power on September 17, 2024 and sell it today you would lose (478.00) from holding Ideal Power or give up 42.91% of portfolio value over 90 days.

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

GrafTech International  vs.  Ideal Power

GrafTech International

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

Ideal Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ideal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with GrafTech International and Ideal Power

The main advantage of trading using opposite GrafTech International and Ideal Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GrafTech International position performs unexpectedly, Ideal Power 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 Ideal Power will offset losses from the drop in Ideal Power's long position.

The idea behind GrafTech International and Ideal Power 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.