Correlation Between Lifecore Biomedical and Soleno Therapeutics

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

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

Diversification Opportunities for Lifecore Biomedical and Soleno Therapeutics

-0.32

Correlation Coefficient

Lifecore Biomedical  Soleno Therapeutics

Very good diversification

The 3 months correlation between Lifecore and Soleno is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lifecore Biomedical and Soleno Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soleno Therapeutics 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 Soleno Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soleno Therapeutics has no effect on the direction of Lifecore Biomedical i.e., Lifecore Biomedical and Soleno Therapeutics go up and down completely randomly.

Pair Corralation between Lifecore Biomedical and Soleno Therapeutics

Given the investment horizon of 90 days Lifecore Biomedical is expected to generate 1.49 times more return on investment than Soleno Therapeutics. However, Lifecore Biomedical is 1.49 times more volatile than Soleno Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Soleno Therapeutics is currently generating about -0.02 per unit of risk. If you would invest  539.00  in Lifecore Biomedical on October 24, 2024 and sell it today you would earn a total of  117.00  from holding Lifecore Biomedical or generate 21.71% return on investment over 90 days.

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

Lifecore Biomedical  vs.  Soleno Therapeutics

Lifecore Biomedical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lifecore Biomedical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Lifecore Biomedical reported solid returns over the last few months and may actually be approaching a breakup point.

Soleno Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soleno Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Soleno Therapeutics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lifecore Biomedical and Soleno Therapeutics

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

The idea behind Lifecore Biomedical and Soleno Therapeutics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.