Correlation Between Ironwood Pharmaceuticals and Amphastar

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

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

Diversification Opportunities for Ironwood Pharmaceuticals and Amphastar

0.91

Correlation Coefficient

Ironwood Pharmaceuticals  Amphastar

Almost no diversification

The 3 months correlation between Ironwood and Amphastar is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Ironwood Pharmaceuticals and Amphastar P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amphastar P and Ironwood Pharmaceuticals 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 Ironwood Pharmaceuticals are associated (or correlated) with Amphastar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amphastar P has no effect on the direction of Ironwood Pharmaceuticals i.e., Ironwood Pharmaceuticals and Amphastar go up and down completely randomly.

Pair Corralation between Ironwood Pharmaceuticals and Amphastar

Given the investment horizon of 90 days Ironwood Pharmaceuticals is expected to under-perform the Amphastar. In addition to that, Ironwood Pharmaceuticals is 2.77 times more volatile than Amphastar P. It trades about -0.25 of its total potential returns per unit of risk. Amphastar P is currently generating about -0.17 per unit of volatility. If you would invest  3,684  in Amphastar P on December 30, 2024 and sell it today you would lose (841.00) from holding Amphastar P or give up 22.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Ironwood Pharmaceuticals  vs.  Amphastar P

Ironwood Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ironwood Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Amphastar P

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amphastar P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ironwood Pharmaceuticals and Amphastar

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

The idea behind Ironwood Pharmaceuticals and Amphastar P 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.