Correlation Between Hafnia and IPG Photonics

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

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

Diversification Opportunities for Hafnia and IPG Photonics

-0.67

Correlation Coefficient

Hafnia  IPG Photonics

Excellent diversification

The 3 months correlation between Hafnia and IPG is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hafnia Limited and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Hafnia 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 Hafnia Limited 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 Hafnia i.e., Hafnia and IPG Photonics go up and down completely randomly.

Pair Corralation between Hafnia and IPG Photonics

Given the investment horizon of 90 days Hafnia Limited is expected to under-perform the IPG Photonics. But the stock apears to be less risky and, when comparing its historical volatility, Hafnia Limited is 1.01 times less risky than IPG Photonics. The stock trades about -0.13 of its potential returns per unit of risk. The IPG Photonics is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,478  in IPG Photonics on September 12, 2024 and sell it today you would earn a total of  1,653  from holding IPG Photonics or generate 25.52% return on investment over 90 days.

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

Hafnia Limited  vs.  IPG Photonics

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

IPG Photonics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, IPG Photonics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hafnia and IPG Photonics

The main advantage of trading using opposite Hafnia and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hafnia 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 Hafnia Limited 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 CEOs Directory module to screen CEOs from public companies around the world.