Correlation Between IPG Photonics and Lakeland Industries

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

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

Diversification Opportunities for IPG Photonics and Lakeland Industries

-0.62

Correlation Coefficient

IPG Photonics  Lakeland Industries

Excellent diversification

The 3 months correlation between IPG and Lakeland is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Lakeland Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeland Industries 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 Lakeland Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeland Industries has no effect on the direction of IPG Photonics i.e., IPG Photonics and Lakeland Industries go up and down completely randomly.

Pair Corralation between IPG Photonics and Lakeland Industries

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Lakeland Industries. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.19 times less risky than Lakeland Industries. The stock trades about -0.01 of its potential returns per unit of risk. The Lakeland Industries is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  2,300  in Lakeland Industries on October 23, 2024 and sell it today you would earn a total of  304.00  from holding Lakeland Industries or generate 13.22% return on investment over 90 days.

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

IPG Photonics  vs.  Lakeland Industries

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.

Lakeland Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lakeland Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Lakeland Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and Lakeland Industries

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

The idea behind IPG Photonics and Lakeland Industries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.