Correlation Between IPG Photonics and Alignment Healthcare

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

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

Diversification Opportunities for IPG Photonics and Alignment Healthcare

0.32

Correlation Coefficient

IPG Photonics  Alignment Healthcare

Weak diversification

The 3 months correlation between IPG and Alignment is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Alignment Healthcare LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alignment Healthcare LLC and IPG Photonics 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 IPG Photonics are associated (or correlated) with Alignment Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alignment Healthcare LLC has no effect on the direction of IPG Photonics i.e., IPG Photonics and Alignment Healthcare go up and down completely randomly.

Pair Corralation between IPG Photonics and Alignment Healthcare

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Alignment Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.49 times less risky than Alignment Healthcare. The stock trades about -0.01 of its potential returns per unit of risk. The Alignment Healthcare LLC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,154  in Alignment Healthcare LLC on October 26, 2024 and sell it today you would earn a total of  303.00  from holding Alignment Healthcare LLC or generate 26.26% return on investment over 90 days.

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

IPG Photonics  vs.  Alignment Healthcare LLC

IPG Photonics

Risk-Adjusted Performance

0 of 100

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.

Alignment Healthcare LLC

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alignment Healthcare LLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, Alignment Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and Alignment Healthcare

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

The idea behind IPG Photonics and Alignment Healthcare LLC 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 Stocks Directory module to find actively traded stocks across global markets.