Correlation Between Phibro Animal and Ironwood Pharmaceuticals

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

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

Diversification Opportunities for Phibro Animal and Ironwood Pharmaceuticals

-0.53

Correlation Coefficient

Phibro Animal  Ironwood Pharmaceuticals

Excellent diversification

The 3 months correlation between Phibro and Ironwood is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Ironwood Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironwood Pharmaceuticals and Phibro Animal 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 Phibro Animal Health 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 Phibro Animal i.e., Phibro Animal and Ironwood Pharmaceuticals go up and down completely randomly.

Pair Corralation between Phibro Animal and Ironwood Pharmaceuticals

Given the investment horizon of 90 days Phibro Animal Health is expected to generate 0.51 times more return on investment than Ironwood Pharmaceuticals. However, Phibro Animal Health is 1.96 times less risky than Ironwood Pharmaceuticals. It trades about 0.03 of its potential returns per unit of risk. Ironwood Pharmaceuticals is currently generating about -0.25 per unit of risk. If you would invest  2,087  in Phibro Animal Health on December 29, 2024 and sell it today you would earn a total of  59.00  from holding Phibro Animal Health or generate 2.83% return on investment over 90 days.

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

Phibro Animal Health  vs.  Ironwood Pharmaceuticals

Phibro Animal Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Phibro Animal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Phibro Animal and Ironwood Pharmaceuticals

The main advantage of trading using opposite Phibro Animal and Ironwood Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phibro Animal 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 Phibro Animal Health 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .