Correlation Between IPG Photonics and Solarmax Technology

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

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

Diversification Opportunities for IPG Photonics and Solarmax Technology

-0.09

Correlation Coefficient

IPG Photonics  Solarmax Technology

Good diversification

The 3 months correlation between IPG and Solarmax is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Solarmax Technology Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solarmax Technology 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 Solarmax Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solarmax Technology has no effect on the direction of IPG Photonics i.e., IPG Photonics and Solarmax Technology go up and down completely randomly.

Pair Corralation between IPG Photonics and Solarmax Technology

Given the investment horizon of 90 days IPG Photonics is expected to generate 0.16 times more return on investment than Solarmax Technology. However, IPG Photonics is 6.38 times less risky than Solarmax Technology. It trades about -0.15 of its potential returns per unit of risk. Solarmax Technology Common is currently generating about -0.05 per unit of risk. If you would invest  7,853  in IPG Photonics on October 11, 2024 and sell it today you would lose (460.00) from holding IPG Photonics or give up 5.86% of portfolio value over 90 days.

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

IPG Photonics  vs.  Solarmax Technology Common

IPG Photonics

Risk-Adjusted Performance

0 of 100

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 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.

Solarmax Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solarmax Technology Common are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Solarmax Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IPG Photonics and Solarmax Technology

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

The idea behind IPG Photonics and Solarmax Technology Common 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.