Correlation Between Kamada and Ironwood Pharmaceuticals

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

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

Diversification Opportunities for Kamada and Ironwood Pharmaceuticals

-0.54

Correlation Coefficient

Kamada  Ironwood Pharmaceuticals

Excellent diversification

The 3 months correlation between Kamada and Ironwood is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kamada and Ironwood Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironwood Pharmaceuticals and Kamada 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 Kamada 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 Kamada i.e., Kamada and Ironwood Pharmaceuticals go up and down completely randomly.

Pair Corralation between Kamada and Ironwood Pharmaceuticals

Given the investment horizon of 90 days Kamada is expected to generate 0.59 times more return on investment than Ironwood Pharmaceuticals. However, Kamada is 1.69 times less risky than Ironwood Pharmaceuticals. It trades about 0.06 of its potential returns per unit of risk. Ironwood Pharmaceuticals is currently generating about -0.06 per unit of risk. If you would invest  432.00  in Kamada on November 19, 2024 and sell it today you would earn a total of  347.00  from holding Kamada or generate 80.32% return on investment over 90 days.

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

Kamada  vs.  Ironwood Pharmaceuticals

Kamada

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kamada are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Kamada sustained solid returns over the last few months and may actually be approaching a breakup point.

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 March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kamada and Ironwood Pharmaceuticals

The main advantage of trading using opposite Kamada and Ironwood Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kamada 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 Kamada 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.