Correlation Between IPG Photonics and Barings BDC

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

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

Diversification Opportunities for IPG Photonics and Barings BDC

-0.02

Correlation Coefficient

IPG Photonics  Barings BDC

Good diversification

The 3 months correlation between IPG and Barings is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Barings BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings BDC 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 Barings BDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings BDC has no effect on the direction of IPG Photonics i.e., IPG Photonics and Barings BDC go up and down completely randomly.

Pair Corralation between IPG Photonics and Barings BDC

Given the investment horizon of 90 days IPG Photonics is expected to generate 1.95 times less return on investment than Barings BDC. In addition to that, IPG Photonics is 2.3 times more volatile than Barings BDC. It trades about 0.01 of its total potential returns per unit of risk. Barings BDC is currently generating about 0.04 per unit of volatility. If you would invest  951.00  in Barings BDC on October 23, 2024 and sell it today you would earn a total of  19.00  from holding Barings BDC or generate 2.0% return on investment over 90 days.

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

IPG Photonics  vs.  Barings BDC

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.

Barings BDC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Barings BDC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IPG Photonics and Barings BDC

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

The idea behind IPG Photonics and Barings BDC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.