Correlation Between Ironwood Pharmaceuticals and Esperion Therapeutics
Can any of the company-specific risk be diversified away by investing in both Ironwood Pharmaceuticals and Esperion Therapeutics 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 Esperion Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ironwood Pharmaceuticals and Esperion Therapeutics, you can compare the effects of market volatilities on Ironwood Pharmaceuticals and Esperion Therapeutics 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 Esperion Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ironwood Pharmaceuticals and Esperion Therapeutics.
Diversification Opportunities for Ironwood Pharmaceuticals and Esperion Therapeutics
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ironwood and Esperion is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ironwood Pharmaceuticals and Esperion Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esperion Therapeutics 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 Esperion Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esperion Therapeutics has no effect on the direction of Ironwood Pharmaceuticals i.e., Ironwood Pharmaceuticals and Esperion Therapeutics go up and down completely randomly.
Pair Corralation between Ironwood Pharmaceuticals and Esperion Therapeutics
Given the investment horizon of 90 days Ironwood Pharmaceuticals is expected to under-perform the Esperion Therapeutics. In addition to that, Ironwood Pharmaceuticals is 1.1 times more volatile than Esperion Therapeutics. It trades about -0.11 of its total potential returns per unit of risk. Esperion Therapeutics is currently generating about 0.19 per unit of volatility. If you would invest 213.00 in Esperion Therapeutics on August 28, 2024 and sell it today you would earn a total of 44.00 from holding Esperion Therapeutics or generate 20.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ironwood Pharmaceuticals vs. Esperion Therapeutics
Performance |
| Timeline |
| Ironwood Pharmaceuticals |
| Esperion Therapeutics |
Ironwood Pharmaceuticals and Esperion Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ironwood Pharmaceuticals and Esperion Therapeutics
The main advantage of trading using opposite Ironwood Pharmaceuticals and Esperion Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ironwood Pharmaceuticals position performs unexpectedly, Esperion Therapeutics 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 Esperion Therapeutics will offset losses from the drop in Esperion Therapeutics' long position.| Ironwood Pharmaceuticals vs. Neurocrine Biosciences | Ironwood Pharmaceuticals vs. Amphastar P | Ironwood Pharmaceuticals vs. Collegium Pharmaceutical | Ironwood Pharmaceuticals vs. ANI Pharmaceuticals |
| Esperion Therapeutics vs. Elanco Animal Health | Esperion Therapeutics vs. SIGA Technologies | Esperion Therapeutics vs. Catalent | Esperion Therapeutics vs. ANI Pharmaceuticals |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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