Correlation Between IPG Photonics and Applied Materials
Can any of the company-specific risk be diversified away by investing in both IPG Photonics and Applied Materials 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 IPG Photonics and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IPG Photonics and Applied Materials, you can compare the effects of market volatilities on IPG Photonics and Applied Materials 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 IPG Photonics with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPG Photonics and Applied Materials.
Diversification Opportunities for IPG Photonics and Applied Materials
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between IPG and Applied is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding IPG Photonics and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and IPG Photonics 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 IPG Photonics are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of IPG Photonics i.e., IPG Photonics and Applied Materials go up and down completely randomly.
Pair Corralation between IPG Photonics and Applied Materials
Given the investment horizon of 90 days IPG Photonics is expected to generate 0.82 times more return on investment than Applied Materials. However, IPG Photonics is 1.21 times less risky than Applied Materials. It trades about 0.14 of its potential returns per unit of risk. Applied Materials is currently generating about 0.0 per unit of risk. If you would invest 6,823 in IPG Photonics on June 4, 2025 and sell it today you would earn a total of 1,194 from holding IPG Photonics or generate 17.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IPG Photonics vs. Applied Materials
Performance |
| Timeline |
| IPG Photonics |
| Applied Materials |
IPG Photonics and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IPG Photonics and Applied Materials
The main advantage of trading using opposite IPG Photonics and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPG Photonics position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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