Correlation Between IPG Photonics and Hudson Technologies

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

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

Diversification Opportunities for IPG Photonics and Hudson Technologies

-0.14

Correlation Coefficient

IPG Photonics  Hudson Technologies

Good diversification

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

Pair Corralation between IPG Photonics and Hudson Technologies

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Hudson Technologies. In addition to that, IPG Photonics is 1.15 times more volatile than Hudson Technologies. It trades about -0.14 of its total potential returns per unit of risk. Hudson Technologies is currently generating about 0.11 per unit of volatility. If you would invest  537.00  in Hudson Technologies on December 17, 2024 and sell it today you would earn a total of  68.00  from holding Hudson Technologies or generate 12.66% return on investment over 90 days.

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

IPG Photonics  vs.  Hudson Technologies

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.

Hudson Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Hudson Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and Hudson Technologies

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

The idea behind IPG Photonics and Hudson Technologies 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.