Correlation Between FARO Technologies and Lipocine

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

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

Diversification Opportunities for FARO Technologies and Lipocine

-0.49

Correlation Coefficient

FARO Technologies  Lipocine

Very good diversification

The 3 months correlation between FARO and Lipocine is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and FARO Technologies 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 FARO Technologies 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 FARO Technologies i.e., FARO Technologies and Lipocine go up and down completely randomly.

Pair Corralation between FARO Technologies and Lipocine

Given the investment horizon of 90 days FARO Technologies is expected to generate 1.06 times more return on investment than Lipocine. However, FARO Technologies is 1.06 times more volatile than Lipocine. It trades about 0.03 of its potential returns per unit of risk. Lipocine is currently generating about -0.39 per unit of risk. If you would invest  3,042  in FARO Technologies on December 4, 2024 and sell it today you would earn a total of  24.00  from holding FARO Technologies or generate 0.79% return on investment over 90 days.

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

FARO Technologies  vs.  Lipocine

FARO Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FARO Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, FARO Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

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 FARO Technologies and Lipocine

The main advantage of trading using opposite FARO Technologies and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies 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 FARO Technologies 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.