Correlation Between IPG Photonics and Macmahon Holdings

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

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

Diversification Opportunities for IPG Photonics and Macmahon Holdings

0.81

Correlation Coefficient

IPG Photonics  Macmahon Holdings

Very poor diversification

The 3 months correlation between IPG and Macmahon is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Macmahon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macmahon Holdings 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 Macmahon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macmahon Holdings has no effect on the direction of IPG Photonics i.e., IPG Photonics and Macmahon Holdings go up and down completely randomly.

Pair Corralation between IPG Photonics and Macmahon Holdings

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Macmahon Holdings. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 2.57 times less risky than Macmahon Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The Macmahon Holdings Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8.79  in Macmahon Holdings Limited on December 2, 2024 and sell it today you would earn a total of  11.21  from holding Macmahon Holdings Limited or generate 127.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	27.68%
Values	Daily Returns

IPG Photonics  vs.  Macmahon Holdings Limited

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.

Macmahon Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macmahon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with IPG Photonics and Macmahon Holdings

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

The idea behind IPG Photonics and Macmahon Holdings Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.