Correlation Between IPG Photonics and Global

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

By analyzing existing cross correlation between IPG Photonics and Global Payments 415, you can compare the effects of market volatilities on IPG Photonics and Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Global.

Diversification Opportunities for IPG Photonics and Global

-0.33

Correlation Coefficient

IPG Photonics  Global

Very good diversification

The 3 months correlation between IPG and Global is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Global Payments 415 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments 415 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments 415 has no effect on the direction of IPG Photonics i.e., IPG Photonics and Global go up and down completely randomly.

Pair Corralation between IPG Photonics and Global

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Global. In addition to that, IPG Photonics is 2.34 times more volatile than Global Payments 415. It trades about -0.06 of its total potential returns per unit of risk. Global Payments 415 is currently generating about 0.06 per unit of volatility. If you would invest  7,497  in Global Payments 415 on December 30, 2024 and sell it today you would earn a total of  226.00  from holding Global Payments 415 or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.48%
Values	Daily Returns

IPG Photonics  vs.  Global Payments 415

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.

Global Payments 415

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Payments 415 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global 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 Global

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

The idea behind IPG Photonics and Global Payments 415 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.

Check out your portfolio center.

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.