Correlation Between IPG Photonics and UNITEDHEALTH

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

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

Diversification Opportunities for IPG Photonics and UNITEDHEALTH

0.19

Correlation Coefficient

IPG Photonics  UNITEDHEALTH

Average diversification

The 3 months correlation between IPG and UNITEDHEALTH is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and UNITEDHEALTH GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITEDHEALTH GROUP INC 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 UNITEDHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITEDHEALTH GROUP INC has no effect on the direction of IPG Photonics i.e., IPG Photonics and UNITEDHEALTH go up and down completely randomly.

Pair Corralation between IPG Photonics and UNITEDHEALTH

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the UNITEDHEALTH. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.33 times less risky than UNITEDHEALTH. The stock trades about -0.16 of its potential returns per unit of risk. The UNITEDHEALTH GROUP INC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,631  in UNITEDHEALTH GROUP INC on October 9, 2024 and sell it today you would earn a total of  135.00  from holding UNITEDHEALTH GROUP INC or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

IPG Photonics  vs.  UNITEDHEALTH GROUP INC

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.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UNITEDHEALTH GROUP INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UNITEDHEALTH 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 UNITEDHEALTH

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

The idea behind IPG Photonics and UNITEDHEALTH GROUP INC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.