Correlation Between Biomerieux and Ipsen SA

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

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

Diversification Opportunities for Biomerieux and Ipsen SA

-0.15

Correlation Coefficient

Biomerieux  Ipsen SA

Good diversification

The 3 months correlation between Biomerieux and Ipsen is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Biomerieux SA and Ipsen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipsen SA and Biomerieux 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 Biomerieux SA 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 Biomerieux i.e., Biomerieux and Ipsen SA go up and down completely randomly.

Pair Corralation between Biomerieux and Ipsen SA

Assuming the 90 days trading horizon Biomerieux SA is expected to generate 0.88 times more return on investment than Ipsen SA. However, Biomerieux SA is 1.13 times less risky than Ipsen SA. It trades about 0.16 of its potential returns per unit of risk. Ipsen SA is currently generating about -0.02 per unit of risk. If you would invest  10,240  in Biomerieux SA on December 30, 2024 and sell it today you would earn a total of  1,400  from holding Biomerieux SA or generate 13.67% return on investment over 90 days.

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

Biomerieux SA  vs.  Ipsen SA

Biomerieux SA

Risk-Adjusted Performance

Good

Over the last 90 days Biomerieux SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak primary indicators, Biomerieux sustained solid returns over the last few months and may actually be approaching a breakup point.

Ipsen SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Biomerieux and Ipsen SA

The main advantage of trading using opposite Biomerieux and Ipsen SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biomerieux 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 Biomerieux SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.