Correlation Between Lipocine and Verastem

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

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

Diversification Opportunities for Lipocine and Verastem

-0.43

Correlation Coefficient

Lipocine  Verastem

Very good diversification

The 3 months correlation between Lipocine and Verastem is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Verastem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verastem 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 Verastem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verastem has no effect on the direction of Lipocine i.e., Lipocine and Verastem go up and down completely randomly.

Pair Corralation between Lipocine and Verastem

Given the investment horizon of 90 days Lipocine is expected to under-perform the Verastem. But the stock apears to be less risky and, when comparing its historical volatility, Lipocine is 1.79 times less risky than Verastem. The stock trades about -0.11 of its potential returns per unit of risk. The Verastem is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  367.00  in Verastem on December 30, 2024 and sell it today you would earn a total of  252.00  from holding Verastem or generate 68.66% return on investment over 90 days.

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

Lipocine  vs.  Verastem

Lipocine

Risk-Adjusted Performance

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Verastem

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Verastem displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lipocine and Verastem

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

The idea behind Lipocine and Verastem 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.