Correlation Between Barings BDC and Lipocine

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

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

Diversification Opportunities for Barings BDC and Lipocine

-0.68

Correlation Coefficient

Barings BDC  Lipocine

Excellent diversification

The 3 months correlation between Barings and Lipocine is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Barings BDC 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 Barings BDC are associated (or correlated) with Lipocine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipocine has no effect on the direction of Barings BDC i.e., Barings BDC and Lipocine go up and down completely randomly.

Pair Corralation between Barings BDC and Lipocine

Given the investment horizon of 90 days Barings BDC is expected to generate 0.25 times more return on investment than Lipocine. However, Barings BDC is 3.98 times less risky than Lipocine. It trades about 0.07 of its potential returns per unit of risk. Lipocine is currently generating about -0.09 per unit of risk. If you would invest  922.00  in Barings BDC on December 26, 2024 and sell it today you would earn a total of  39.00  from holding Barings BDC or generate 4.23% return on investment over 90 days.

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

Barings BDC  vs.  Lipocine

Barings BDC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barings BDC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lipocine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lipocine 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Barings BDC and Lipocine

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

The idea behind Barings BDC and Lipocine 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.