Correlation Between IPG Photonics and Onto Innovation

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

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

Diversification Opportunities for IPG Photonics and Onto Innovation

-0.24

Correlation Coefficient

IPG Photonics  Onto Innovation

Very good diversification

The 3 months correlation between IPG and Onto is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Onto Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onto Innovation 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 Onto Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onto Innovation has no effect on the direction of IPG Photonics i.e., IPG Photonics and Onto Innovation go up and down completely randomly.

Pair Corralation between IPG Photonics and Onto Innovation

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Onto Innovation. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.32 times less risky than Onto Innovation. The stock trades about -0.01 of its potential returns per unit of risk. The Onto Innovation is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,814  in Onto Innovation on September 21, 2024 and sell it today you would earn a total of  10,203  from holding Onto Innovation or generate 149.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

IPG Photonics  vs.  Onto Innovation

IPG Photonics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, IPG Photonics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Onto Innovation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Onto Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with IPG Photonics and Onto Innovation

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

The idea behind IPG Photonics and Onto Innovation 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.