Correlation Between Lipocine and Summit Hotel

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

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

Diversification Opportunities for Lipocine and Summit Hotel

-0.58

Correlation Coefficient

Lipocine  Summit Hotel

Excellent diversification

The 3 months correlation between Lipocine and Summit is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties 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 Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of Lipocine i.e., Lipocine and Summit Hotel go up and down completely randomly.

Pair Corralation between Lipocine and Summit Hotel

Given the investment horizon of 90 days Lipocine is expected to generate 2.32 times more return on investment than Summit Hotel. However, Lipocine is 2.32 times more volatile than Summit Hotel Properties. It trades about 0.04 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.01 per unit of risk. If you would invest  449.00  in Lipocine on September 28, 2024 and sell it today you would earn a total of  27.00  from holding Lipocine or generate 6.01% 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.  Summit Hotel Properties

Lipocine

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Lipocine displayed solid returns over the last few months and may actually be approaching a breakup point.

Summit Hotel Properties

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Summit Hotel Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Summit Hotel is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lipocine and Summit Hotel

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

The idea behind Lipocine and Summit Hotel Properties 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.