Correlation Between Dynatrace Holdings and IPG Photonics

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

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

Diversification Opportunities for Dynatrace Holdings and IPG Photonics

-0.35

Correlation Coefficient

Dynatrace Holdings  IPG Photonics

Very good diversification

The 3 months correlation between Dynatrace and IPG is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dynatrace Holdings LLC and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics and Dynatrace Holdings 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 Dynatrace Holdings 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 Dynatrace Holdings i.e., Dynatrace Holdings and IPG Photonics go up and down completely randomly.

Pair Corralation between Dynatrace Holdings and IPG Photonics

Allowing for the 90-day total investment horizon Dynatrace Holdings LLC is expected to generate 0.91 times more return on investment than IPG Photonics. However, Dynatrace Holdings LLC is 1.09 times less risky than IPG Photonics. It trades about 0.16 of its potential returns per unit of risk. IPG Photonics is currently generating about -0.09 per unit of risk. If you would invest  4,409  in Dynatrace Holdings LLC on July 23, 2024 and sell it today you would earn a total of  1,029  from holding Dynatrace Holdings LLC or generate 23.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Dynatrace Holdings LLC  vs.  IPG Photonics

Dynatrace Holdings LLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynatrace Holdings LLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Dynatrace Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 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 November 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Dynatrace Holdings and IPG Photonics

The main advantage of trading using opposite Dynatrace Holdings and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynatrace Holdings 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 Dynatrace Holdings 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.