Correlation Between Lipocine and Mustang Bio

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

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

Diversification Opportunities for Lipocine and Mustang Bio

0.63

Correlation Coefficient

Lipocine  Mustang Bio

Poor diversification

The 3 months correlation between Lipocine and Mustang is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Mustang Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustang Bio 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 Mustang Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustang Bio has no effect on the direction of Lipocine i.e., Lipocine and Mustang Bio go up and down completely randomly.

Pair Corralation between Lipocine and Mustang Bio

Given the investment horizon of 90 days Lipocine is expected to under-perform the Mustang Bio. But the stock apears to be less risky and, when comparing its historical volatility, Lipocine is 1.56 times less risky than Mustang Bio. The stock trades about -0.02 of its potential returns per unit of risk. The Mustang Bio is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Mustang Bio on October 9, 2024 and sell it today you would earn a total of  2.00  from holding Mustang Bio or generate 10.53% return on investment over 90 days.

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

Lipocine  vs.  Mustang Bio

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 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.

Mustang Bio

Risk-Adjusted Performance

1 of 100

Insignificant

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

Pair Trading with Lipocine and Mustang Bio

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

The idea behind Lipocine and Mustang Bio 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..