Correlation Between IPG Photonics and Chemours

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

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

Diversification Opportunities for IPG Photonics and Chemours

0.75

Correlation Coefficient

IPG Photonics  Chemours

Poor diversification

The 3 months correlation between IPG and Chemours is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours 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 Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of IPG Photonics i.e., IPG Photonics and Chemours go up and down completely randomly.

Pair Corralation between IPG Photonics and Chemours

Given the investment horizon of 90 days IPG Photonics is expected to generate 0.72 times more return on investment than Chemours. However, IPG Photonics is 1.39 times less risky than Chemours. It trades about -0.19 of its potential returns per unit of risk. Chemours Co is currently generating about -0.21 per unit of risk. If you would invest  7,536  in IPG Photonics on December 4, 2024 and sell it today you would lose (1,709) from holding IPG Photonics or give up 22.68% of portfolio value over 90 days.

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

IPG Photonics  vs.  Chemours Co

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.

Chemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with IPG Photonics and Chemours

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

The idea behind IPG Photonics and Chemours Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.