Correlation Between IPG Photonics and Ivanhoe Electric

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

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

Diversification Opportunities for IPG Photonics and Ivanhoe Electric

0.63

Correlation Coefficient

IPG Photonics  Ivanhoe Electric

Poor diversification

The 3 months correlation between IPG and Ivanhoe is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Ivanhoe Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Electric 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 Ivanhoe Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Electric has no effect on the direction of IPG Photonics i.e., IPG Photonics and Ivanhoe Electric go up and down completely randomly.

Pair Corralation between IPG Photonics and Ivanhoe Electric

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Ivanhoe Electric. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.63 times less risky than Ivanhoe Electric. The stock trades about -0.06 of its potential returns per unit of risk. The Ivanhoe Electric is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  780.00  in Ivanhoe Electric on December 27, 2024 and sell it today you would lose (91.00) from holding Ivanhoe Electric or give up 11.67% of portfolio value over 90 days.

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

IPG Photonics  vs.  Ivanhoe Electric

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.

Ivanhoe Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ivanhoe Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with IPG Photonics and Ivanhoe Electric

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

The idea behind IPG Photonics and Ivanhoe Electric 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.