Correlation Between 83001AAC6 and IPG Photonics

Can any of the company-specific risk be diversified away by investing in both 83001AAC6 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 83001AAC6 and IPG Photonics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Six Flags Entertainment and IPG Photonics, you can compare the effects of market volatilities on 83001AAC6 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 83001AAC6 with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of 83001AAC6 and IPG Photonics.

Diversification Opportunities for 83001AAC6 and IPG Photonics

0.19

Correlation Coefficient

83001AAC6  IPG Photonics

Average diversification

The 3 months correlation between 83001AAC6 and IPG is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Six Flags Entertainment and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and 83001AAC6 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 Six Flags Entertainment 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 83001AAC6 i.e., 83001AAC6 and IPG Photonics go up and down completely randomly.

Pair Corralation between 83001AAC6 and IPG Photonics

Assuming the 90 days trading horizon Six Flags Entertainment is expected to generate 0.19 times more return on investment than IPG Photonics. However, Six Flags Entertainment is 5.19 times less risky than IPG Photonics. It trades about -0.25 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.35 per unit of risk. If you would invest  9,964  in Six Flags Entertainment on October 8, 2024 and sell it today you would lose (126.00) from holding Six Flags Entertainment or give up 1.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.21%
Values	Daily Returns

Six Flags Entertainment  vs.  IPG Photonics

Six Flags Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Six Flags Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 83001AAC6 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

IPG Photonics

Risk-Adjusted Performance

0 of 100

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 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 83001AAC6 and IPG Photonics

The main advantage of trading using opposite 83001AAC6 and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 83001AAC6 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 Six Flags Entertainment 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.