Correlation Between Verastem and Lipocine

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

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

Diversification Opportunities for Verastem and Lipocine

0.52

Correlation Coefficient

Verastem  Lipocine

Very weak diversification

The 3 months correlation between Verastem and Lipocine is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Verastem 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 Verastem 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 Verastem i.e., Verastem and Lipocine go up and down completely randomly.

Pair Corralation between Verastem and Lipocine

Given the investment horizon of 90 days Verastem is expected to generate 1.29 times more return on investment than Lipocine. However, Verastem is 1.29 times more volatile than Lipocine. It trades about 0.23 of its potential returns per unit of risk. Lipocine is currently generating about 0.1 per unit of risk. If you would invest  242.00  in Verastem on September 3, 2024 and sell it today you would earn a total of  292.00  from holding Verastem or generate 120.66% return on investment over 90 days.

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

Verastem  vs.  Lipocine

Verastem

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 18 (%) 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.

Lipocine

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Lipocine displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verastem and Lipocine

The main advantage of trading using opposite Verastem and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verastem 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 Verastem 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.