Correlation Between IPG Photonics and Universal Insurance

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

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

Diversification Opportunities for IPG Photonics and Universal Insurance

-0.64

Correlation Coefficient

IPG Photonics  Universal Insurance

Excellent diversification

The 3 months correlation between IPG and Universal is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance 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 Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of IPG Photonics i.e., IPG Photonics and Universal Insurance go up and down completely randomly.

Pair Corralation between IPG Photonics and Universal Insurance

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Universal Insurance. In addition to that, IPG Photonics is 1.25 times more volatile than Universal Insurance Holdings. It trades about -0.07 of its total potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.07 per unit of volatility. If you would invest  2,044  in Universal Insurance Holdings on December 19, 2024 and sell it today you would earn a total of  137.00  from holding Universal Insurance Holdings or generate 6.7% return on investment over 90 days.

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

IPG Photonics  vs.  Universal Insurance Holdings

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.

Universal Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Universal Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IPG Photonics and Universal Insurance

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

The idea behind IPG Photonics and Universal Insurance Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.