Correlation Between Hudson Technologies and IPG Photonics

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

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

Diversification Opportunities for Hudson Technologies and IPG Photonics

0.05

Correlation Coefficient

Hudson Technologies  IPG Photonics

Significant diversification

The 3 months correlation between Hudson and IPG is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Technologies and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Hudson Technologies 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 Hudson Technologies 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 Hudson Technologies i.e., Hudson Technologies and IPG Photonics go up and down completely randomly.

Pair Corralation between Hudson Technologies and IPG Photonics

Given the investment horizon of 90 days Hudson Technologies is expected to generate 1.01 times more return on investment than IPG Photonics. However, Hudson Technologies is 1.01 times more volatile than IPG Photonics. It trades about 0.01 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.13 per unit of risk. If you would invest  588.00  in Hudson Technologies on October 12, 2024 and sell it today you would earn a total of  0.00  from holding Hudson Technologies or generate 0.0% return on investment over 90 days.

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

Hudson Technologies  vs.  IPG Photonics

Hudson Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Technologies 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 basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

IPG Photonics

Risk-Adjusted Performance

0 of 100

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 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 Hudson Technologies and IPG Photonics

The main advantage of trading using opposite Hudson Technologies and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hudson Technologies 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 Hudson Technologies 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.