Correlation Between Lithium Americas and Lipocine

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

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

Diversification Opportunities for Lithium Americas and Lipocine

0.52

Correlation Coefficient

Lithium Americas  Lipocine

Very weak diversification

The 3 months correlation between Lithium and Lipocine is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lithium Americas Corp and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Lithium Americas 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 Lithium Americas Corp 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 Lithium Americas i.e., Lithium Americas and Lipocine go up and down completely randomly.

Pair Corralation between Lithium Americas and Lipocine

Given the investment horizon of 90 days Lithium Americas Corp is expected to under-perform the Lipocine. But the stock apears to be less risky and, when comparing its historical volatility, Lithium Americas Corp is 1.04 times less risky than Lipocine. The stock trades about -0.1 of its potential returns per unit of risk. The Lipocine is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  510.00  in Lipocine on October 7, 2024 and sell it today you would lose (4.00) from holding Lipocine or give up 0.78% of portfolio value over 90 days.

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

Lithium Americas Corp  vs.  Lipocine

Lithium Americas Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lithium Americas Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 unfluctuating fundamental indicators, Lipocine may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lithium Americas and Lipocine

The main advantage of trading using opposite Lithium Americas and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithium Americas 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 Lithium Americas Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.