Correlation Between Lipocine and PEPSICO

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

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

Diversification Opportunities for Lipocine and PEPSICO

0.26

Correlation Coefficient

Lipocine  PEPSICO

Modest diversification

The 3 months correlation between Lipocine and PEPSICO is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and PEPSICO INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 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 PEPSICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPSICO INC has no effect on the direction of Lipocine i.e., Lipocine and PEPSICO go up and down completely randomly.

Pair Corralation between Lipocine and PEPSICO

Given the investment horizon of 90 days Lipocine is expected to generate 236.37 times less return on investment than PEPSICO. But when comparing it to its historical volatility, Lipocine is 12.59 times less risky than PEPSICO. It trades about 0.0 of its potential returns per unit of risk. PEPSICO INC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,118  in PEPSICO INC on October 13, 2024 and sell it today you would lose (1,255) from holding PEPSICO INC or give up 13.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	43.15%
Values	Daily Returns

Lipocine  vs.  PEPSICO INC

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.

PEPSICO INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PEPSICO INC investors.

Pair Trading with Lipocine and PEPSICO

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

The idea behind Lipocine and PEPSICO INC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.