Correlation Between VTv Therapeutics and Lipocine

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

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

Diversification Opportunities for VTv Therapeutics and Lipocine

-0.28

Correlation Coefficient

VTv Therapeutics  Lipocine

Very good diversification

The 3 months correlation between VTv and Lipocine is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding vTv Therapeutics and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and VTv Therapeutics 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 vTv Therapeutics 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 VTv Therapeutics i.e., VTv Therapeutics and Lipocine go up and down completely randomly.

Pair Corralation between VTv Therapeutics and Lipocine

Given the investment horizon of 90 days VTv Therapeutics is expected to generate 3.05 times less return on investment than Lipocine. But when comparing it to its historical volatility, vTv Therapeutics is 1.16 times less risky than Lipocine. It trades about 0.04 of its potential returns per unit of risk. Lipocine is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  365.00  in Lipocine on September 3, 2024 and sell it today you would earn a total of  89.00  from holding Lipocine or generate 24.38% return on investment over 90 days.

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

vTv Therapeutics  vs.  Lipocine

vTv Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in vTv Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VTv Therapeutics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 VTv Therapeutics and Lipocine

The main advantage of trading using opposite VTv Therapeutics and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VTv Therapeutics 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 vTv Therapeutics 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.