Correlation Between Lipocine and RBC Bearings

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

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

Diversification Opportunities for Lipocine and RBC Bearings

-0.34

Correlation Coefficient

Lipocine  RBC Bearings

Very good diversification

The 3 months correlation between Lipocine and RBC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Lipocine i.e., Lipocine and RBC Bearings go up and down completely randomly.

Pair Corralation between Lipocine and RBC Bearings

Given the investment horizon of 90 days Lipocine is expected to generate 3.6 times more return on investment than RBC Bearings. However, Lipocine is 3.6 times more volatile than RBC Bearings Incorporated. It trades about 0.07 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.03 per unit of risk. If you would invest  286.00  in Lipocine on September 25, 2024 and sell it today you would earn a total of  201.00  from holding Lipocine or generate 70.28% return on investment over 90 days.

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

Lipocine  vs.  RBC Bearings Incorporated

Lipocine

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Lipocine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RBC Bearings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RBC Bearings Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, RBC Bearings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lipocine and RBC Bearings

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

The idea behind Lipocine and RBC Bearings Incorporated 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.