Correlation Between Nexstar Broadcasting and IPG Photonics

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

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

Diversification Opportunities for Nexstar Broadcasting and IPG Photonics

0.73

Correlation Coefficient

Nexstar Broadcasting  IPG Photonics

Poor diversification

The 3 months correlation between Nexstar and IPG is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nexstar Broadcasting Group and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Nexstar Broadcasting 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 Nexstar Broadcasting Group 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 Nexstar Broadcasting i.e., Nexstar Broadcasting and IPG Photonics go up and down completely randomly.

Pair Corralation between Nexstar Broadcasting and IPG Photonics

Given the investment horizon of 90 days Nexstar Broadcasting Group is expected to generate 0.55 times more return on investment than IPG Photonics. However, Nexstar Broadcasting Group is 1.82 times less risky than IPG Photonics. It trades about -0.01 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.1 per unit of risk. If you would invest  16,435  in Nexstar Broadcasting Group on October 9, 2024 and sell it today you would lose (113.00) from holding Nexstar Broadcasting Group or give up 0.69% of portfolio value over 90 days.

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

Nexstar Broadcasting Group  vs.  IPG Photonics

Nexstar Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexstar Broadcasting Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nexstar Broadcasting is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

IPG Photonics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Nexstar Broadcasting and IPG Photonics

The main advantage of trading using opposite Nexstar Broadcasting and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexstar Broadcasting 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 Nexstar Broadcasting Group 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.