Correlation Between Lipocine and Nuvalent

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

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

Diversification Opportunities for Lipocine and Nuvalent

-0.39

Correlation Coefficient

Lipocine  Nuvalent

Very good diversification

The 3 months correlation between Lipocine and Nuvalent is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent 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 Nuvalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvalent has no effect on the direction of Lipocine i.e., Lipocine and Nuvalent go up and down completely randomly.

Pair Corralation between Lipocine and Nuvalent

Given the investment horizon of 90 days Lipocine is expected to generate 2.11 times more return on investment than Nuvalent. However, Lipocine is 2.11 times more volatile than Nuvalent. It trades about 0.13 of its potential returns per unit of risk. Nuvalent is currently generating about 0.02 per unit of risk. If you would invest  472.00  in Lipocine on September 19, 2024 and sell it today you would earn a total of  49.00  from holding Lipocine or generate 10.38% return on investment over 90 days.

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

Lipocine  vs.  Nuvalent

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 uncertain fundamental indicators, Lipocine displayed solid returns over the last few months and may actually be approaching a breakup point.

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lipocine and Nuvalent

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

The idea behind Lipocine and Nuvalent 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.