Correlation Between Burning Rock and Lipocine

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

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

Diversification Opportunities for Burning Rock and Lipocine

-0.43

Correlation Coefficient

Burning Rock  Lipocine

Very good diversification

The 3 months correlation between Burning and Lipocine is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Burning Rock Biotech and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Burning Rock 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 Burning Rock Biotech 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 Burning Rock i.e., Burning Rock and Lipocine go up and down completely randomly.

Pair Corralation between Burning Rock and Lipocine

Considering the 90-day investment horizon Burning Rock is expected to generate 5.72 times less return on investment than Lipocine. In addition to that, Burning Rock is 1.05 times more volatile than Lipocine. It trades about 0.01 of its total potential returns per unit of risk. Lipocine is currently generating about 0.04 per unit of volatility. If you would invest  375.00  in Lipocine on October 4, 2024 and sell it today you would earn a total of  111.00  from holding Lipocine or generate 29.6% return on investment over 90 days.

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

Burning Rock Biotech  vs.  Lipocine

Burning Rock Biotech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

Lipocine

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Lipocine may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Burning Rock and Lipocine

The main advantage of trading using opposite Burning Rock and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burning Rock 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 Burning Rock Biotech 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.