Correlation Between Lipocine and Arm Holdings

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

By analyzing existing cross correlation between Lipocine and Arm Holdings plc, you can compare the effects of market volatilities on Lipocine and Arm Holdings 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 Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lipocine and Arm Holdings.

Diversification Opportunities for Lipocine and Arm Holdings

0.29

Correlation Coefficient

Lipocine  Arm Holdings

Modest diversification

The 3 months correlation between Lipocine and Arm is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Lipocine i.e., Lipocine and Arm Holdings go up and down completely randomly.

Pair Corralation between Lipocine and Arm Holdings

Given the investment horizon of 90 days Lipocine is expected to generate 3.79 times less return on investment than Arm Holdings. In addition to that, Lipocine is 2.04 times more volatile than Arm Holdings plc. It trades about 0.02 of its total potential returns per unit of risk. Arm Holdings plc is currently generating about 0.15 per unit of volatility. If you would invest  13,306  in Arm Holdings plc on September 20, 2024 and sell it today you would earn a total of  974.00  from holding Arm Holdings plc or generate 7.32% return on investment over 90 days.

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

Lipocine  vs.  Arm Holdings plc

Lipocine

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Lipocine is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Arm Holdings plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Arm Holdings is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lipocine and Arm Holdings

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

The idea behind Lipocine and Arm Holdings plc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.