Correlation Between VARNO and IPG Photonics

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

By analyzing existing cross correlation between VARNO 75 15 JAN 28 and IPG Photonics, you can compare the effects of market volatilities on VARNO 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 VARNO with a short position of IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARNO and IPG Photonics.

Diversification Opportunities for VARNO and IPG Photonics

0.14

Correlation Coefficient

VARNO  IPG Photonics

Average diversification

The 3 months correlation between VARNO and IPG is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding VARNO 75 15 JAN 28 and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and VARNO 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 VARNO 75 15 JAN 28 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 VARNO i.e., VARNO and IPG Photonics go up and down completely randomly.

Pair Corralation between VARNO and IPG Photonics

Assuming the 90 days trading horizon VARNO 75 15 JAN 28 is expected to generate 0.09 times more return on investment than IPG Photonics. However, VARNO 75 15 JAN 28 is 10.79 times less risky than IPG Photonics. It trades about 0.15 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.05 per unit of risk. If you would invest  10,547  in VARNO 75 15 JAN 28 on December 27, 2024 and sell it today you would earn a total of  137.00  from holding VARNO 75 15 JAN 28 or generate 1.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	65.0%
Values	Daily Returns

VARNO 75 15 JAN 28  vs.  IPG Photonics

VARNO 75 15

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VARNO 75 15 JAN 28 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, VARNO 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 latest weak performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with VARNO and IPG Photonics

The main advantage of trading using opposite VARNO and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VARNO 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 VARNO 75 15 JAN 28 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.