Correlation Between Air Transport and Ipsen SA

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

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

Diversification Opportunities for Air Transport and Ipsen SA

0.66

Correlation Coefficient

Air Transport  Ipsen SA

Poor diversification

The 3 months correlation between Air and Ipsen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Ipsen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipsen SA and Air Transport 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 Air Transport Services are associated (or correlated) with Ipsen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ipsen SA has no effect on the direction of Air Transport i.e., Air Transport and Ipsen SA go up and down completely randomly.

Pair Corralation between Air Transport and Ipsen SA

Assuming the 90 days horizon Air Transport Services is expected to under-perform the Ipsen SA. But the stock apears to be less risky and, when comparing its historical volatility, Air Transport Services is 2.53 times less risky than Ipsen SA. The stock trades about -0.08 of its potential returns per unit of risk. The Ipsen SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,800  in Ipsen SA on December 19, 2024 and sell it today you would earn a total of  350.00  from holding Ipsen SA or generate 3.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Air Transport Services  vs.  Ipsen SA

Air Transport Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Transport Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ipsen SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ipsen SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Ipsen SA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Air Transport and Ipsen SA

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

The idea behind Air Transport Services and Ipsen SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.