Correlation Between IPG Photonics and Q2 Holdings

Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Q2 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 Q2 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 Q2 Holdings, you can compare the effects of market volatilities on IPG Photonics and Q2 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 Q2 Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Q2 Holdings.

Diversification Opportunities for IPG Photonics and Q2 Holdings

0.1

Correlation Coefficient

IPG Photonics  Q2 Holdings

Average diversification

The 3 months correlation between IPG and QTWO is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Q2 Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q2 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 Q2 Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q2 Holdings has no effect on the direction of IPG Photonics i.e., IPG Photonics and Q2 Holdings go up and down completely randomly.

Pair Corralation between IPG Photonics and Q2 Holdings

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Q2 Holdings. In addition to that, IPG Photonics is 1.32 times more volatile than Q2 Holdings. It trades about -0.17 of its total potential returns per unit of risk. Q2 Holdings is currently generating about -0.17 per unit of volatility. If you would invest  10,645  in Q2 Holdings on October 9, 2024 and sell it today you would lose (534.00) from holding Q2 Holdings or give up 5.02% of portfolio value over 90 days.

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

IPG Photonics  vs.  Q2 Holdings

IPG Photonics

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Q2 Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Q2 Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and Q2 Holdings

The main advantage of trading using opposite IPG Photonics and Q2 Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Q2 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 Q2 Holdings will offset losses from the drop in Q2 Holdings' long position.

The idea behind IPG Photonics and Q2 Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.