Correlation Between Lipocine and NYSE New

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

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

Diversification Opportunities for Lipocine and NYSE New

0.04

Correlation Coefficient

Lipocine  NYSE New

Significant diversification

The 3 months correlation between Lipocine and NYSE is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and NYSE New Highs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE New Highs 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 NYSE New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE New Highs has no effect on the direction of Lipocine i.e., Lipocine and NYSE New go up and down completely randomly.

Pair Corralation between Lipocine and NYSE New

Given the investment horizon of 90 days Lipocine is expected to under-perform the NYSE New. But the stock apears to be less risky and, when comparing its historical volatility, Lipocine is 7.49 times less risky than NYSE New. The stock trades about -0.35 of its potential returns per unit of risk. The NYSE New Highs is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,300  in NYSE New Highs on December 4, 2024 and sell it today you would earn a total of  5,800  from holding NYSE New Highs or generate 175.76% return on investment over 90 days.

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

Lipocine  vs.  NYSE New Highs

Pair Trading with Lipocine and NYSE New

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

The idea behind Lipocine and NYSE New Highs 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.