Correlation Between IPG Photonics and Selective Insurance

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

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

Diversification Opportunities for IPG Photonics and Selective Insurance

0.77

Correlation Coefficient

IPG Photonics  Selective Insurance

Poor diversification

The 3 months correlation between IPG and Selective is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of IPG Photonics i.e., IPG Photonics and Selective Insurance go up and down completely randomly.

Pair Corralation between IPG Photonics and Selective Insurance

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Selective Insurance. In addition to that, IPG Photonics is 1.08 times more volatile than Selective Insurance Group. It trades about -0.07 of its total potential returns per unit of risk. Selective Insurance Group is currently generating about -0.02 per unit of volatility. If you would invest  9,317  in Selective Insurance Group on December 19, 2024 and sell it today you would lose (403.00) from holding Selective Insurance Group or give up 4.33% of portfolio value over 90 days.

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

IPG Photonics  vs.  Selective Insurance 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.

Selective Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Selective Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Selective Insurance is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IPG Photonics and Selective Insurance

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

The idea behind IPG Photonics and Selective Insurance 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.