Correlation Between Lipocine and Azul SA

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

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

Diversification Opportunities for Lipocine and Azul SA

0.21

Correlation Coefficient

Lipocine  Azul SA

Modest diversification

The 3 months correlation between Lipocine and Azul is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul SA 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 Azul SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azul SA has no effect on the direction of Lipocine i.e., Lipocine and Azul SA go up and down completely randomly.

Pair Corralation between Lipocine and Azul SA

Given the investment horizon of 90 days Lipocine is expected to generate 1.06 times more return on investment than Azul SA. However, Lipocine is 1.06 times more volatile than Azul SA. It trades about 0.0 of its potential returns per unit of risk. Azul SA is currently generating about -0.03 per unit of risk. If you would invest  986.00  in Lipocine on October 5, 2024 and sell it today you would lose (500.00) from holding Lipocine or give up 50.71% of portfolio value over 90 days.

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

Lipocine  vs.  Azul SA

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 current stock price disarray, may contribute to short-term losses for the investors.

Azul SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azul SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Lipocine and Azul SA

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

The idea behind Lipocine and Azul SA 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.

Check out your portfolio center.

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.