Correlation Between Equillium and Lipocine

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

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

Diversification Opportunities for Equillium and Lipocine

0.46

Correlation Coefficient

Equillium  Lipocine

Very weak diversification

The 3 months correlation between Equillium and Lipocine is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Equillium 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 Equillium 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 Equillium i.e., Equillium and Lipocine go up and down completely randomly.

Pair Corralation between Equillium and Lipocine

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.26 times more return on investment than Lipocine. However, Equillium is 1.26 times more volatile than Lipocine. It trades about 0.04 of its potential returns per unit of risk. Lipocine is currently generating about 0.02 per unit of risk. If you would invest  60.00  in Equillium on October 5, 2024 and sell it today you would earn a total of  16.88  from holding Equillium or generate 28.13% return on investment over 90 days.

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

Equillium  vs.  Lipocine

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equillium has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equillium is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Lipocine

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 2 (%) 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 Equillium and Lipocine

The main advantage of trading using opposite Equillium and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equillium 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 Equillium 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.