Correlation Between Lifecore Biomedical and Neurocrine Biosciences

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

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

Diversification Opportunities for Lifecore Biomedical and Neurocrine Biosciences

0.82

Correlation Coefficient

Lifecore Biomedical  Neurocrine Biosciences

Very poor diversification

The 3 months correlation between Lifecore and Neurocrine is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lifecore Biomedical and Neurocrine Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neurocrine Biosciences and Lifecore Biomedical 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 Lifecore Biomedical are associated (or correlated) with Neurocrine Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neurocrine Biosciences has no effect on the direction of Lifecore Biomedical i.e., Lifecore Biomedical and Neurocrine Biosciences go up and down completely randomly.

Pair Corralation between Lifecore Biomedical and Neurocrine Biosciences

Given the investment horizon of 90 days Lifecore Biomedical is expected to generate 1.15 times less return on investment than Neurocrine Biosciences. In addition to that, Lifecore Biomedical is 2.32 times more volatile than Neurocrine Biosciences. It trades about 0.02 of its total potential returns per unit of risk. Neurocrine Biosciences is currently generating about 0.04 per unit of volatility. If you would invest  10,964  in Neurocrine Biosciences on October 4, 2024 and sell it today you would earn a total of  2,822  from holding Neurocrine Biosciences or generate 25.74% return on investment over 90 days.

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

Lifecore Biomedical  vs.  Neurocrine Biosciences

Lifecore Biomedical

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifecore Biomedical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Lifecore Biomedical reported solid returns over the last few months and may actually be approaching a breakup point.

Neurocrine Biosciences

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neurocrine Biosciences are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Neurocrine Biosciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifecore Biomedical and Neurocrine Biosciences

The main advantage of trading using opposite Lifecore Biomedical and Neurocrine Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifecore Biomedical position performs unexpectedly, Neurocrine Biosciences 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 Neurocrine Biosciences will offset losses from the drop in Neurocrine Biosciences' long position.

The idea behind Lifecore Biomedical and Neurocrine Biosciences 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.