Correlation Between Lipocine and BridgeBio Pharma

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

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

Diversification Opportunities for Lipocine and BridgeBio Pharma

-0.48

Correlation Coefficient

Lipocine  BridgeBio Pharma

Very good diversification

The 3 months correlation between Lipocine and BridgeBio is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and BridgeBio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BridgeBio Pharma 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 BridgeBio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BridgeBio Pharma has no effect on the direction of Lipocine i.e., Lipocine and BridgeBio Pharma go up and down completely randomly.

Pair Corralation between Lipocine and BridgeBio Pharma

Given the investment horizon of 90 days Lipocine is expected to under-perform the BridgeBio Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Lipocine is 1.13 times less risky than BridgeBio Pharma. The stock trades about -0.14 of its potential returns per unit of risk. The BridgeBio Pharma is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  2,853  in BridgeBio Pharma on October 25, 2024 and sell it today you would earn a total of  731.00  from holding BridgeBio Pharma or generate 25.62% return on investment over 90 days.

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

Lipocine  vs.  BridgeBio Pharma

Lipocine

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BridgeBio Pharma

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BridgeBio Pharma are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, BridgeBio Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lipocine and BridgeBio Pharma

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

The idea behind Lipocine and BridgeBio Pharma 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.