Correlation Between IPG Photonics and BTC Digital

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

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

Diversification Opportunities for IPG Photonics and BTC Digital

0.54

Correlation Coefficient

IPG Photonics  BTC Digital

Very weak diversification

The 3 months correlation between IPG and BTC is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and BTC Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTC Digital 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 BTC Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTC Digital has no effect on the direction of IPG Photonics i.e., IPG Photonics and BTC Digital go up and down completely randomly.

Pair Corralation between IPG Photonics and BTC Digital

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the BTC Digital. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 4.85 times less risky than BTC Digital. The stock trades about -0.08 of its potential returns per unit of risk. The BTC Digital is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  511.00  in BTC Digital on December 26, 2024 and sell it today you would lose (50.00) from holding BTC Digital or give up 9.78% of portfolio value over 90 days.

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

IPG Photonics  vs.  BTC Digital

IPG Photonics

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

BTC Digital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BTC Digital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, BTC Digital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and BTC Digital

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

The idea behind IPG Photonics and BTC Digital 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.