Correlation Between IPG Photonics and Valmont Industries

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

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

Diversification Opportunities for IPG Photonics and Valmont Industries

0.29

Correlation Coefficient

IPG Photonics  Valmont Industries

Modest diversification

The 3 months correlation between IPG and Valmont is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries 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 Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of IPG Photonics i.e., IPG Photonics and Valmont Industries go up and down completely randomly.

Pair Corralation between IPG Photonics and Valmont Industries

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Valmont Industries. In addition to that, IPG Photonics is 1.12 times more volatile than Valmont Industries. It trades about -0.03 of its total potential returns per unit of risk. Valmont Industries is currently generating about 0.02 per unit of volatility. If you would invest  31,405  in Valmont Industries on October 26, 2024 and sell it today you would earn a total of  2,843  from holding Valmont Industries or generate 9.05% return on investment over 90 days.

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

IPG Photonics  vs.  Valmont Industries

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.

Valmont Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Valmont Industries is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IPG Photonics and Valmont Industries

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

The idea behind IPG Photonics and Valmont Industries 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 CEOs Directory module to screen CEOs from public companies around the world.