Correlation Between Lixte Biotechnology and Lexaria Bioscience

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

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

Diversification Opportunities for Lixte Biotechnology and Lexaria Bioscience

-0.64

Correlation Coefficient

Lixte Biotechnology  Lexaria Bioscience

Excellent diversification

The 3 months correlation between Lixte and Lexaria is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lixte Biotechnology Holdings and Lexaria Bioscience Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexaria Bioscience Corp and Lixte Biotechnology 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 Lixte Biotechnology Holdings are associated (or correlated) with Lexaria Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexaria Bioscience Corp has no effect on the direction of Lixte Biotechnology i.e., Lixte Biotechnology and Lexaria Bioscience go up and down completely randomly.

Pair Corralation between Lixte Biotechnology and Lexaria Bioscience

Assuming the 90 days horizon Lixte Biotechnology Holdings is expected to generate 1.31 times more return on investment than Lexaria Bioscience. However, Lixte Biotechnology is 1.31 times more volatile than Lexaria Bioscience Corp. It trades about 0.1 of its potential returns per unit of risk. Lexaria Bioscience Corp is currently generating about -0.01 per unit of risk. If you would invest  2.90  in Lixte Biotechnology Holdings on December 26, 2024 and sell it today you would earn a total of  0.50  from holding Lixte Biotechnology Holdings or generate 17.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.8%
Values	Daily Returns

Lixte Biotechnology Holdings  vs.  Lexaria Bioscience Corp

Lixte Biotechnology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lixte Biotechnology Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lixte Biotechnology showed solid returns over the last few months and may actually be approaching a breakup point.

Lexaria Bioscience Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lexaria Bioscience Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Lixte Biotechnology and Lexaria Bioscience

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

The idea behind Lixte Biotechnology Holdings and Lexaria Bioscience Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.