Correlation Between IPG Photonics and Nexstar Broadcasting

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

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

Diversification Opportunities for IPG Photonics and Nexstar Broadcasting

-0.33

Correlation Coefficient

IPG Photonics  Nexstar Broadcasting

Very good diversification

The 3 months correlation between IPG and Nexstar is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Nexstar Broadcasting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Broadcasting 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 Nexstar Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Broadcasting has no effect on the direction of IPG Photonics i.e., IPG Photonics and Nexstar Broadcasting go up and down completely randomly.

Pair Corralation between IPG Photonics and Nexstar Broadcasting

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Nexstar Broadcasting. In addition to that, IPG Photonics is 1.13 times more volatile than Nexstar Broadcasting Group. It trades about -0.07 of its total potential returns per unit of risk. Nexstar Broadcasting Group is currently generating about 0.1 per unit of volatility. If you would invest  15,510  in Nexstar Broadcasting Group on December 19, 2024 and sell it today you would earn a total of  1,942  from holding Nexstar Broadcasting Group or generate 12.52% return on investment over 90 days.

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

IPG Photonics  vs.  Nexstar Broadcasting Group

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.

Nexstar Broadcasting

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Broadcasting Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nexstar Broadcasting unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and Nexstar Broadcasting

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

The idea behind IPG Photonics and Nexstar Broadcasting Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.