Correlation Between Lipocine and HUTCHMED DRC

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

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

Diversification Opportunities for Lipocine and HUTCHMED DRC

0.26

Correlation Coefficient

Lipocine  HUTCHMED DRC

Modest diversification

The 3 months correlation between Lipocine and HUTCHMED is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC 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 HUTCHMED DRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUTCHMED DRC has no effect on the direction of Lipocine i.e., Lipocine and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between Lipocine and HUTCHMED DRC

Given the investment horizon of 90 days Lipocine is expected to generate 2.02 times more return on investment than HUTCHMED DRC. However, Lipocine is 2.02 times more volatile than HUTCHMED DRC. It trades about 0.15 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about -0.5 per unit of risk. If you would invest  430.00  in Lipocine on October 1, 2024 and sell it today you would earn a total of  46.00  from holding Lipocine or generate 10.7% 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.  HUTCHMED DRC

Lipocine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Lipocine displayed solid returns over the last few months and may actually be approaching a breakup point.

HUTCHMED DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUTCHMED DRC 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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Lipocine and HUTCHMED DRC

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

The idea behind Lipocine and HUTCHMED DRC 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.