Correlation Between IPG Photonics and MusclePharm

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Can any of the company-specific risk be diversified away by investing in both IPG Photonics and MusclePharm 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 MusclePharm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and MusclePharm, you can compare the effects of market volatilities on IPG Photonics and MusclePharm 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 MusclePharm. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and MusclePharm.

Diversification Opportunities for IPG Photonics and MusclePharm

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between IPG and MusclePharm is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and MusclePharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MusclePharm 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 MusclePharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MusclePharm has no effect on the direction of IPG Photonics i.e., IPG Photonics and MusclePharm go up and down completely randomly.

Pair Corralation between IPG Photonics and MusclePharm

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the MusclePharm. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 29.19 times less risky than MusclePharm. The stock trades about -0.03 of its potential returns per unit of risk. The MusclePharm is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.13  in MusclePharm on October 26, 2024 and sell it today you would lose (0.13) from holding MusclePharm or give up 100.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy81.78%
ValuesDaily Returns

IPG Photonics  vs.  MusclePharm

 Performance 
       Timeline  
IPG Photonics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
MusclePharm 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MusclePharm has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MusclePharm is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

IPG Photonics and MusclePharm Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IPG Photonics and MusclePharm

The main advantage of trading using opposite IPG Photonics and MusclePharm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, MusclePharm 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 MusclePharm will offset losses from the drop in MusclePharm's long position.
The idea behind IPG Photonics and MusclePharm 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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