Correlation Between Alligator Bioscience and Lipigon Pharmaceuticals

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

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

Diversification Opportunities for Alligator Bioscience and Lipigon Pharmaceuticals

0.71

Correlation Coefficient

Alligator Bioscience  Lipigon Pharmaceuticals

Poor diversification

The 3 months correlation between Alligator and Lipigon is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alligator Bioscience AB and Lipigon Pharmaceuticals AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipigon Pharmaceuticals and Alligator Bioscience 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 Alligator Bioscience AB are associated (or correlated) with Lipigon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipigon Pharmaceuticals has no effect on the direction of Alligator Bioscience i.e., Alligator Bioscience and Lipigon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Alligator Bioscience and Lipigon Pharmaceuticals

Assuming the 90 days trading horizon Alligator Bioscience AB is expected to under-perform the Lipigon Pharmaceuticals. In addition to that, Alligator Bioscience is 2.24 times more volatile than Lipigon Pharmaceuticals AB. It trades about -0.15 of its total potential returns per unit of risk. Lipigon Pharmaceuticals AB is currently generating about -0.12 per unit of volatility. If you would invest  17.00  in Lipigon Pharmaceuticals AB on September 24, 2024 and sell it today you would lose (3.00) from holding Lipigon Pharmaceuticals AB or give up 17.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Alligator Bioscience AB  vs.  Lipigon Pharmaceuticals AB

Alligator Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alligator Bioscience AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lipigon Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lipigon Pharmaceuticals AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alligator Bioscience and Lipigon Pharmaceuticals

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

The idea behind Alligator Bioscience AB and Lipigon Pharmaceuticals AB 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.