Correlation Between IPG Photonics and LENSAR

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

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

Diversification Opportunities for IPG Photonics and LENSAR

-0.66

Correlation Coefficient

IPG Photonics  LENSAR

Excellent diversification

The 3 months correlation between IPG and LENSAR is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and LENSAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENSAR 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 LENSAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENSAR Inc has no effect on the direction of IPG Photonics i.e., IPG Photonics and LENSAR go up and down completely randomly.

Pair Corralation between IPG Photonics and LENSAR

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the LENSAR. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 2.49 times less risky than LENSAR. The stock trades about -0.05 of its potential returns per unit of risk. The LENSAR Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  838.00  in LENSAR Inc on December 27, 2024 and sell it today you would earn a total of  576.00  from holding LENSAR Inc or generate 68.74% 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.  LENSAR Inc

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.

LENSAR Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and LENSAR

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

The idea behind IPG Photonics and LENSAR 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.