Correlation Between Ipsen SA and Laureate Education

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

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

Diversification Opportunities for Ipsen SA and Laureate Education

0.48

Correlation Coefficient

Ipsen SA  Laureate Education

Very weak diversification

The 3 months correlation between Ipsen and Laureate is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ipsen SA and Laureate Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laureate Education and Ipsen SA 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 Ipsen SA are associated (or correlated) with Laureate Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laureate Education has no effect on the direction of Ipsen SA i.e., Ipsen SA and Laureate Education go up and down completely randomly.

Pair Corralation between Ipsen SA and Laureate Education

Assuming the 90 days trading horizon Ipsen SA is expected to generate 3.92 times less return on investment than Laureate Education. But when comparing it to its historical volatility, Ipsen SA is 1.16 times less risky than Laureate Education. It trades about 0.0 of its potential returns per unit of risk. Laureate Education is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,760  in Laureate Education on December 11, 2024 and sell it today you would earn a total of  10.00  from holding Laureate Education or generate 0.57% return on investment over 90 days.

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

Ipsen SA  vs.  Laureate Education

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. In spite of comparatively stable technical and fundamental indicators, Ipsen SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Laureate Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Laureate Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Laureate Education is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ipsen SA and Laureate Education

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

The idea behind Ipsen SA and Laureate Education 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.