Correlation Between IPG Photonics and CapitaLand Investment

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

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

Diversification Opportunities for IPG Photonics and CapitaLand Investment

0.55

Correlation Coefficient

IPG Photonics  CapitaLand Investment

Very weak diversification

The 3 months correlation between IPG and CapitaLand is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of IPG Photonics i.e., IPG Photonics and CapitaLand Investment go up and down completely randomly.

Pair Corralation between IPG Photonics and CapitaLand Investment

Given the investment horizon of 90 days IPG Photonics is expected to generate 1.16 times more return on investment than CapitaLand Investment. However, IPG Photonics is 1.16 times more volatile than CapitaLand Investment Limited. It trades about -0.06 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about -0.13 per unit of risk. If you would invest  7,225  in IPG Photonics on December 28, 2024 and sell it today you would lose (712.00) from holding IPG Photonics or give up 9.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

IPG Photonics  vs.  CapitaLand Investment Limited

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 latest weak performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

CapitaLand Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with IPG Photonics and CapitaLand Investment

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

The idea behind IPG Photonics and CapitaLand Investment Limited 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.