Correlation Between Disney and Lipocine

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

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

Diversification Opportunities for Disney and Lipocine

-0.66

Correlation Coefficient

Disney  Lipocine

Excellent diversification

The 3 months correlation between Disney and Lipocine is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Disney 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 Walt Disney 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 Disney i.e., Disney and Lipocine go up and down completely randomly.

Pair Corralation between Disney and Lipocine

Considering the 90-day investment horizon Walt Disney is expected to generate 0.3 times more return on investment than Lipocine. However, Walt Disney is 3.28 times less risky than Lipocine. It trades about 0.11 of its potential returns per unit of risk. Lipocine is currently generating about -0.03 per unit of risk. If you would invest  8,940  in Walt Disney on October 22, 2024 and sell it today you would earn a total of  1,762  from holding Walt Disney or generate 19.71% return on investment over 90 days.

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

Walt Disney  vs.  Lipocine

Walt Disney

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lipocine

Risk-Adjusted Performance

0 of 100

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Disney and Lipocine

The main advantage of trading using opposite Disney and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.