Correlation Between IPG Photonics and Ihuman

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

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

Diversification Opportunities for IPG Photonics and Ihuman

0.21

Correlation Coefficient

IPG Photonics  Ihuman

Modest diversification

The 3 months correlation between IPG and Ihuman is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Ihuman Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ihuman Inc 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 Ihuman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ihuman Inc has no effect on the direction of IPG Photonics i.e., IPG Photonics and Ihuman go up and down completely randomly.

Pair Corralation between IPG Photonics and Ihuman

Given the investment horizon of 90 days IPG Photonics is expected to generate 0.59 times more return on investment than Ihuman. However, IPG Photonics is 1.69 times less risky than Ihuman. It trades about 0.14 of its potential returns per unit of risk. Ihuman Inc is currently generating about 0.06 per unit of risk. If you would invest  6,478  in IPG Photonics on September 12, 2024 and sell it today you would earn a total of  1,375  from holding IPG Photonics or generate 21.23% return on investment over 90 days.

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

IPG Photonics  vs.  Ihuman Inc

IPG Photonics

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, IPG Photonics reported solid returns over the last few months and may actually be approaching a breakup point.

Ihuman Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ihuman Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Ihuman demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and Ihuman

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

The idea behind IPG Photonics and Ihuman Inc 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.