Correlation Between Lipocine and Willamette Valley

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

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

Diversification Opportunities for Lipocine and Willamette Valley

-0.01

Correlation Coefficient

Lipocine  Willamette Valley

Good diversification

The 3 months correlation between Lipocine and Willamette is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Lipocine i.e., Lipocine and Willamette Valley go up and down completely randomly.

Pair Corralation between Lipocine and Willamette Valley

Given the investment horizon of 90 days Lipocine is expected to generate 2.74 times more return on investment than Willamette Valley. However, Lipocine is 2.74 times more volatile than Willamette Valley Vineyards. It trades about 0.05 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.07 per unit of risk. If you would invest  477.00  in Lipocine on September 19, 2024 and sell it today you would earn a total of  41.00  from holding Lipocine or generate 8.6% return on investment over 90 days.

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

Lipocine  vs.  Willamette Valley Vineyards

Lipocine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 4 (%) 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.

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Lipocine and Willamette Valley

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

The idea behind Lipocine and Willamette Valley Vineyards 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.