Correlation Between IPG Photonics and FactSet Research

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

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

Diversification Opportunities for IPG Photonics and FactSet Research

-0.14

Correlation Coefficient

IPG Photonics  FactSet Research

Good diversification

The 3 months correlation between IPG and FactSet is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and FactSet Research Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FactSet Research Systems 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 FactSet Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FactSet Research Systems has no effect on the direction of IPG Photonics i.e., IPG Photonics and FactSet Research go up and down completely randomly.

Pair Corralation between IPG Photonics and FactSet Research

Given the investment horizon of 90 days IPG Photonics is expected to generate 2.82 times more return on investment than FactSet Research. However, IPG Photonics is 2.82 times more volatile than FactSet Research Systems. It trades about -0.07 of its potential returns per unit of risk. FactSet Research Systems is currently generating about -0.4 per unit of risk. If you would invest  7,641  in IPG Photonics on October 26, 2024 and sell it today you would lose (235.00) from holding IPG Photonics or give up 3.08% of portfolio value over 90 days.

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

IPG Photonics  vs.  FactSet Research Systems

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.

FactSet Research Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, FactSet Research is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IPG Photonics and FactSet Research

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

The idea behind IPG Photonics and FactSet Research Systems 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.