Correlation Between IPG Photonics and Globalfoundries

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

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

Diversification Opportunities for IPG Photonics and Globalfoundries

0.18

Correlation Coefficient

IPG Photonics  Globalfoundries

Average diversification

The 3 months correlation between IPG and Globalfoundries is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of IPG Photonics i.e., IPG Photonics and Globalfoundries go up and down completely randomly.

Pair Corralation between IPG Photonics and Globalfoundries

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Globalfoundries. In addition to that, IPG Photonics is 1.29 times more volatile than Globalfoundries. It trades about -0.17 of its total potential returns per unit of risk. Globalfoundries is currently generating about -0.12 per unit of volatility. If you would invest  4,512  in Globalfoundries on October 3, 2024 and sell it today you would lose (221.00) from holding Globalfoundries or give up 4.9% of portfolio value over 90 days.

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

IPG Photonics  vs.  Globalfoundries

IPG Photonics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and Globalfoundries

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

The idea behind IPG Photonics and Globalfoundries 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.