Correlation Between Athenex and Ironwood Pharmaceuticals

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

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

Diversification Opportunities for Athenex and Ironwood Pharmaceuticals

0.23

Correlation Coefficient

Athenex  Ironwood Pharmaceuticals

Modest diversification

The 3 months correlation between Athenex and Ironwood is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Athenex and Ironwood Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironwood Pharmaceuticals and Athenex 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 Athenex are associated (or correlated) with Ironwood Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironwood Pharmaceuticals has no effect on the direction of Athenex i.e., Athenex and Ironwood Pharmaceuticals go up and down completely randomly.

Pair Corralation between Athenex and Ironwood Pharmaceuticals

If you would invest  343.00  in Ironwood Pharmaceuticals on October 7, 2024 and sell it today you would earn a total of  108.00  from holding Ironwood Pharmaceuticals or generate 31.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.0%
Values	Daily Returns

Athenex  vs.  Ironwood Pharmaceuticals

Athenex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Athenex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Athenex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ironwood Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ironwood Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Ironwood Pharmaceuticals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Athenex and Ironwood Pharmaceuticals

The main advantage of trading using opposite Athenex and Ironwood Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Athenex position performs unexpectedly, Ironwood Pharmaceuticals 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 Ironwood Pharmaceuticals will offset losses from the drop in Ironwood Pharmaceuticals' long position.

The idea behind Athenex and Ironwood Pharmaceuticals 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.