Correlation Between TRON and Ipsen SA

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

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

Diversification Opportunities for TRON and Ipsen SA

-0.48

Correlation Coefficient

TRON  Ipsen SA

Very good diversification

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

Pair Corralation between TRON and Ipsen SA

Assuming the 90 days trading horizon TRON is expected to under-perform the Ipsen SA. In addition to that, TRON is 3.35 times more volatile than Ipsen SA. It trades about -0.06 of its total potential returns per unit of risk. Ipsen SA is currently generating about 0.34 per unit of volatility. If you would invest  10,900  in Ipsen SA on October 9, 2024 and sell it today you would earn a total of  830.00  from holding Ipsen SA or generate 7.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

TRON  vs.  Ipsen SA

TRON

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TRON exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ipsen SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ipsen SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with TRON and Ipsen SA

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

The idea behind TRON and Ipsen SA 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.