Correlation Between IPG Photonics and Telix Pharmaceuticals

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

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

Diversification Opportunities for IPG Photonics and Telix Pharmaceuticals

0.03

Correlation Coefficient

IPG Photonics  Telix Pharmaceuticals

Significant diversification

The 3 months correlation between IPG and Telix is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Telix Pharmaceuticals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telix Pharmaceuticals 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 Telix Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telix Pharmaceuticals has no effect on the direction of IPG Photonics i.e., IPG Photonics and Telix Pharmaceuticals go up and down completely randomly.

Pair Corralation between IPG Photonics and Telix Pharmaceuticals

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Telix Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.18 times less risky than Telix Pharmaceuticals. The stock trades about -0.13 of its potential returns per unit of risk. The Telix Pharmaceuticals Limited is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,619  in Telix Pharmaceuticals Limited on October 4, 2024 and sell it today you would lose (79.00) from holding Telix Pharmaceuticals Limited or give up 4.88% 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.  Telix Pharmaceuticals Limited

IPG Photonics

Risk-Adjusted Performance

0 of 100

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.

Telix Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telix Pharmaceuticals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Telix Pharmaceuticals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IPG Photonics and Telix Pharmaceuticals

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

The idea behind IPG Photonics and Telix Pharmaceuticals Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.