Correlation Between Lipocine and Aluminum Futures

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

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

Diversification Opportunities for Lipocine and Aluminum Futures

-0.3

Correlation Coefficient

Lipocine  Aluminum Futures

Very good diversification

The 3 months correlation between Lipocine and Aluminum is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Aluminum Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum Futures and Lipocine 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 Lipocine are associated (or correlated) with Aluminum Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum Futures has no effect on the direction of Lipocine i.e., Lipocine and Aluminum Futures go up and down completely randomly.

Pair Corralation between Lipocine and Aluminum Futures

Given the investment horizon of 90 days Lipocine is expected to under-perform the Aluminum Futures. In addition to that, Lipocine is 3.92 times more volatile than Aluminum Futures. It trades about -0.11 of its total potential returns per unit of risk. Aluminum Futures is currently generating about -0.04 per unit of volatility. If you would invest  254,525  in Aluminum Futures on December 30, 2024 and sell it today you would lose (8,575) from holding Aluminum Futures or give up 3.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Lipocine  vs.  Aluminum Futures

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.

Aluminum Futures

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aluminum Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Aluminum Futures is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lipocine and Aluminum Futures

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

The idea behind Lipocine and Aluminum Futures 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.