Correlation Between NORFOLK and Lipocine

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

By analyzing existing cross correlation between NORFOLK SOUTHN P and Lipocine, you can compare the effects of market volatilities on NORFOLK and Lipocine 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 NORFOLK with a short position of Lipocine. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORFOLK and Lipocine.

Diversification Opportunities for NORFOLK and Lipocine

0.25

Correlation Coefficient

NORFOLK  Lipocine

Modest diversification

The 3 months correlation between NORFOLK and Lipocine is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and NORFOLK 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 NORFOLK SOUTHN P are associated (or correlated) with Lipocine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipocine has no effect on the direction of NORFOLK i.e., NORFOLK and Lipocine go up and down completely randomly.

Pair Corralation between NORFOLK and Lipocine

Assuming the 90 days trading horizon NORFOLK is expected to generate 6.57 times less return on investment than Lipocine. But when comparing it to its historical volatility, NORFOLK SOUTHN P is 19.39 times less risky than Lipocine. It trades about 0.01 of its potential returns per unit of risk. Lipocine is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  917.00  in Lipocine on October 26, 2024 and sell it today you would lose (448.00) from holding Lipocine or give up 48.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.54%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  Lipocine

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORFOLK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NORFOLK and Lipocine

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

The idea behind NORFOLK SOUTHN P and Lipocine 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.