Correlation Between NBCUNIVERSAL and IPG Photonics

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

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

Diversification Opportunities for NBCUNIVERSAL and IPG Photonics

0.61

Correlation Coefficient

NBCUNIVERSAL  IPG Photonics

Poor diversification

The 3 months correlation between NBCUNIVERSAL and IPG is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NBCUNIVERSAL MEDIA LLC and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and NBCUNIVERSAL 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 NBCUNIVERSAL MEDIA LLC 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 NBCUNIVERSAL i.e., NBCUNIVERSAL and IPG Photonics go up and down completely randomly.

Pair Corralation between NBCUNIVERSAL and IPG Photonics

Assuming the 90 days trading horizon NBCUNIVERSAL MEDIA LLC is expected to generate 45.11 times more return on investment than IPG Photonics. However, NBCUNIVERSAL is 45.11 times more volatile than IPG Photonics. It trades about 0.09 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.01 per unit of risk. If you would invest  10,792  in NBCUNIVERSAL MEDIA LLC on September 19, 2024 and sell it today you would lose (365.00) from holding NBCUNIVERSAL MEDIA LLC or give up 3.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	37.5%
Values	Daily Returns

NBCUNIVERSAL MEDIA LLC  vs.  IPG Photonics

NBCUNIVERSAL MEDIA LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBCUNIVERSAL MEDIA LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for NBCUNIVERSAL MEDIA LLC investors.

IPG Photonics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IPG Photonics are ranked lower than 3 (%) 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 NBCUNIVERSAL and IPG Photonics

The main advantage of trading using opposite NBCUNIVERSAL and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NBCUNIVERSAL 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 NBCUNIVERSAL MEDIA LLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.