Correlation Between Ironwood Pharmaceuticals and Incyte

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

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

Diversification Opportunities for Ironwood Pharmaceuticals and Incyte

0.52

Correlation Coefficient

Ironwood Pharmaceuticals  Incyte

Very weak diversification

The 3 months correlation between Ironwood and Incyte is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ironwood Pharmaceuticals and Incyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incyte 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 Incyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incyte has no effect on the direction of Ironwood Pharmaceuticals i.e., Ironwood Pharmaceuticals and Incyte go up and down completely randomly.

Pair Corralation between Ironwood Pharmaceuticals and Incyte

Given the investment horizon of 90 days Ironwood Pharmaceuticals is expected to generate 1.58 times less return on investment than Incyte. In addition to that, Ironwood Pharmaceuticals is 3.38 times more volatile than Incyte. It trades about 0.04 of its total potential returns per unit of risk. Incyte is currently generating about 0.2 per unit of volatility. If you would invest  5,955  in Incyte on May 7, 2025 and sell it today you would earn a total of  1,817  from holding Incyte or generate 30.51% return on investment over 90 days.

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

Ironwood Pharmaceuticals  vs.  Incyte

Ironwood Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ironwood Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Ironwood Pharmaceuticals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Incyte

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Incyte are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Incyte showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ironwood Pharmaceuticals and Incyte

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

The idea behind Ironwood Pharmaceuticals and Incyte 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.