Correlation Between Pacira BioSciences, and Ironwood Pharmaceuticals

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

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

Diversification Opportunities for Pacira BioSciences, and Ironwood Pharmaceuticals

-0.22

Correlation Coefficient

Pacira BioSciences,  Ironwood Pharmaceuticals

Very good diversification

The 3 months correlation between Pacira and Ironwood is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Pacira BioSciences, and Ironwood Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironwood Pharmaceuticals and Pacira BioSciences, 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 Pacira BioSciences, 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 Pacira BioSciences, i.e., Pacira BioSciences, and Ironwood Pharmaceuticals go up and down completely randomly.

Pair Corralation between Pacira BioSciences, and Ironwood Pharmaceuticals

Given the investment horizon of 90 days Pacira BioSciences, is expected to generate 0.55 times more return on investment than Ironwood Pharmaceuticals. However, Pacira BioSciences, is 1.83 times less risky than Ironwood Pharmaceuticals. It trades about 0.07 of its potential returns per unit of risk. Ironwood Pharmaceuticals is currently generating about -0.09 per unit of risk. If you would invest  1,518  in Pacira BioSciences, on August 31, 2024 and sell it today you would earn a total of  146.00  from holding Pacira BioSciences, or generate 9.62% return on investment over 90 days.

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

Pacira BioSciences,  vs.  Ironwood Pharmaceuticals

Pacira BioSciences,

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacira BioSciences, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Pacira BioSciences, may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ironwood Pharmaceuticals

Risk-Adjusted Performance

0 of 100

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 December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Pacira BioSciences, and Ironwood Pharmaceuticals

The main advantage of trading using opposite Pacira BioSciences, and Ironwood Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacira BioSciences, 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 Pacira BioSciences, 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.