Correlation Between IPG Photonics and Plexus Corp

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

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

Diversification Opportunities for IPG Photonics and Plexus Corp

0.86

Correlation Coefficient

IPG Photonics  Plexus Corp

Very poor diversification

The 3 months correlation between IPG and Plexus is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of IPG Photonics i.e., IPG Photonics and Plexus Corp go up and down completely randomly.

Pair Corralation between IPG Photonics and Plexus Corp

Given the investment horizon of 90 days IPG Photonics is expected to generate 1.17 times more return on investment than Plexus Corp. However, IPG Photonics is 1.17 times more volatile than Plexus Corp. It trades about -0.08 of its potential returns per unit of risk. Plexus Corp is currently generating about -0.16 per unit of risk. If you would invest  7,641  in IPG Photonics on December 26, 2024 and sell it today you would lose (980.00) from holding IPG Photonics or give up 12.83% of portfolio value over 90 days.

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

IPG Photonics  vs.  Plexus Corp

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.

Plexus Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plexus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with IPG Photonics and Plexus Corp

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

The idea behind IPG Photonics and Plexus Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.