Correlation Between IPG Photonics and SL Green

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

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

Diversification Opportunities for IPG Photonics and SL Green

0.79

Correlation Coefficient

IPG Photonics  SL Green

Poor diversification

The 3 months correlation between IPG and SLG is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and SL Green Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SL Green Realty 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 SL Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SL Green Realty has no effect on the direction of IPG Photonics i.e., IPG Photonics and SL Green go up and down completely randomly.

Pair Corralation between IPG Photonics and SL Green

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the SL Green. In addition to that, IPG Photonics is 1.29 times more volatile than SL Green Realty. It trades about -0.06 of its total potential returns per unit of risk. SL Green Realty is currently generating about -0.06 per unit of volatility. If you would invest  7,599  in SL Green Realty on September 5, 2024 and sell it today you would lose (217.00) from holding SL Green Realty or give up 2.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

IPG Photonics  vs.  SL Green Realty

IPG Photonics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, IPG Photonics reported solid returns over the last few months and may actually be approaching a breakup point.

SL Green Realty

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, SL Green reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and SL Green

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

The idea behind IPG Photonics and SL Green Realty 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 Stocks Directory module to find actively traded stocks across global markets.