Correlation Between IPG Photonics and Western Copper

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

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

Diversification Opportunities for IPG Photonics and Western Copper

-0.11

Correlation Coefficient

IPG Photonics  Western Copper

Good diversification

The 3 months correlation between IPG and Western is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of IPG Photonics i.e., IPG Photonics and Western Copper go up and down completely randomly.

Pair Corralation between IPG Photonics and Western Copper

Given the investment horizon of 90 days IPG Photonics is expected to under-perform the Western Copper. But the stock apears to be less risky and, when comparing its historical volatility, IPG Photonics is 1.22 times less risky than Western Copper. The stock trades about -0.05 of its potential returns per unit of risk. The Western Copper and is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  105.00  in Western Copper and on December 27, 2024 and sell it today you would earn a total of  10.00  from holding Western Copper and or generate 9.52% return on investment over 90 days.

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

IPG Photonics  vs.  Western Copper and

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.

Western Copper

Risk-Adjusted Performance

Modest

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

Pair Trading with IPG Photonics and Western Copper

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

The idea behind IPG Photonics and Western Copper and 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.