Correlation Between Catalent and Lipocine

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

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

Diversification Opportunities for Catalent and Lipocine

-0.32

Correlation Coefficient

Catalent  Lipocine

Very good diversification

The 3 months correlation between Catalent and Lipocine is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Catalent 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 Catalent 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 Catalent i.e., Catalent and Lipocine go up and down completely randomly.

Pair Corralation between Catalent and Lipocine

Given the investment horizon of 90 days Catalent is expected to generate 7.2 times less return on investment than Lipocine. But when comparing it to its historical volatility, Catalent is 7.99 times less risky than Lipocine. It trades about 0.11 of its potential returns per unit of risk. Lipocine is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  408.00  in Lipocine on September 12, 2024 and sell it today you would earn a total of  107.00  from holding Lipocine or generate 26.23% return on investment over 90 days.

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

Catalent  vs.  Lipocine

Catalent

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Lipocine

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Lipocine displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalent and Lipocine

The main advantage of trading using opposite Catalent and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent 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 Catalent 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.