Correlation Between Macmahon Holdings and IPG Photonics

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

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

Diversification Opportunities for Macmahon Holdings and IPG Photonics

0.69

Correlation Coefficient

Macmahon Holdings  IPG Photonics

Poor diversification

The 3 months correlation between Macmahon and IPG is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Macmahon Holdings Limited and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Macmahon Holdings 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 Macmahon Holdings Limited are associated (or correlated) with IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Macmahon Holdings i.e., Macmahon Holdings and IPG Photonics go up and down completely randomly.

Pair Corralation between Macmahon Holdings and IPG Photonics

If you would invest  25.00  in Macmahon Holdings Limited on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Macmahon Holdings Limited or generate 0.0% return on investment over 90 days.

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

Macmahon Holdings Limited  vs.  IPG Photonics

Macmahon Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Macmahon Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

IPG Photonics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, IPG Photonics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macmahon Holdings and IPG Photonics

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

The idea behind Macmahon Holdings Limited and IPG Photonics 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.