Correlation Between Guardion Health and Ironwood Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both Guardion Health 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 Guardion Health and Ironwood Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guardion Health Sciences and Ironwood Pharmaceuticals, you can compare the effects of market volatilities on Guardion Health 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 Guardion Health with a short position of Ironwood Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guardion Health and Ironwood Pharmaceuticals.

Diversification Opportunities for Guardion Health and Ironwood Pharmaceuticals

-0.79
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Guardion and Ironwood is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Guardion Health Sciences and Ironwood Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironwood Pharmaceuticals and Guardion Health 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 Guardion Health Sciences 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 Guardion Health i.e., Guardion Health and Ironwood Pharmaceuticals go up and down completely randomly.

Pair Corralation between Guardion Health and Ironwood Pharmaceuticals

Given the investment horizon of 90 days Guardion Health is expected to generate 12.64 times less return on investment than Ironwood Pharmaceuticals. But when comparing it to its historical volatility, Guardion Health Sciences is 2.1 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 0.15 of returns per unit of risk over similar time horizon. If you would invest  609.00  in Ironwood Pharmaceuticals on April 22, 2024 and sell it today you would earn a total of  63.00  from holding Ironwood Pharmaceuticals or generate 10.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Guardion Health Sciences  vs.  Ironwood Pharmaceuticals

 Performance 
       Timeline  
Guardion Health Sciences 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Guardion Health Sciences are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Guardion Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Ironwood Pharmaceuticals 

Risk-Adjusted Performance

0 of 100

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

Guardion Health and Ironwood Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guardion Health and Ironwood Pharmaceuticals

The main advantage of trading using opposite Guardion Health and Ironwood Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guardion Health 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 Guardion Health Sciences 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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