Correlation Between Lipocine and Southland Holdings

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

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

Diversification Opportunities for Lipocine and Southland Holdings

-0.16

Correlation Coefficient

Lipocine  Southland Holdings

Good diversification

The 3 months correlation between Lipocine and Southland is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Southland Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southland Holdings 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 Southland Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southland Holdings has no effect on the direction of Lipocine i.e., Lipocine and Southland Holdings go up and down completely randomly.

Pair Corralation between Lipocine and Southland Holdings

Given the investment horizon of 90 days Lipocine is expected to under-perform the Southland Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Lipocine is 1.33 times less risky than Southland Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The Southland Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  361.00  in Southland Holdings on October 23, 2024 and sell it today you would lose (11.00) from holding Southland Holdings or give up 3.05% of portfolio value over 90 days.

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

Lipocine  vs.  Southland Holdings

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 weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Southland Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southland Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Southland Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lipocine and Southland Holdings

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

The idea behind Lipocine and Southland Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.