Correlation Between FREEPORT and IPG Photonics

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

By analyzing existing cross correlation between FREEPORT MCMORAN INC 525 and IPG Photonics, you can compare the effects of market volatilities on FREEPORT 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 FREEPORT with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of FREEPORT and IPG Photonics.

Diversification Opportunities for FREEPORT and IPG Photonics

-0.39

Correlation Coefficient

FREEPORT  IPG Photonics

Very good diversification

The 3 months correlation between FREEPORT and IPG is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding FREEPORT MCMORAN INC 525 and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and FREEPORT 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 FREEPORT MCMORAN INC 525 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 FREEPORT i.e., FREEPORT and IPG Photonics go up and down completely randomly.

Pair Corralation between FREEPORT and IPG Photonics

Assuming the 90 days trading horizon FREEPORT MCMORAN INC 525 is expected to generate 0.15 times more return on investment than IPG Photonics. However, FREEPORT MCMORAN INC 525 is 6.84 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 -0.11 per unit of risk. If you would invest  10,034  in FREEPORT MCMORAN INC 525 on December 24, 2024 and sell it today you would earn a total of  13.00  from holding FREEPORT MCMORAN INC 525 or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

FREEPORT MCMORAN INC 525  vs.  IPG Photonics

FREEPORT MCMORAN INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FREEPORT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with FREEPORT and IPG Photonics

The main advantage of trading using opposite FREEPORT and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FREEPORT 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 FREEPORT MCMORAN INC 525 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.