Correlation Between Summit Therapeutics and Lipocine

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

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

Diversification Opportunities for Summit Therapeutics and Lipocine

0.02

Correlation Coefficient

Summit Therapeutics  Lipocine

Significant diversification

The 3 months correlation between Summit and Lipocine is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Summit Therapeutics PLC and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Summit 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 Summit Therapeutics PLC 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 Summit Therapeutics i.e., Summit Therapeutics and Lipocine go up and down completely randomly.

Pair Corralation between Summit Therapeutics and Lipocine

Given the investment horizon of 90 days Summit Therapeutics PLC is expected to under-perform the Lipocine. In addition to that, Summit Therapeutics is 1.02 times more volatile than Lipocine. It trades about -0.03 of its total potential returns per unit of risk. Lipocine is currently generating about 0.09 per unit of volatility. If you would invest  445.00  in Lipocine on September 28, 2024 and sell it today you would earn a total of  27.00  from holding Lipocine or generate 6.07% return on investment over 90 days.

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

Summit Therapeutics PLC  vs.  Lipocine

Summit Therapeutics PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Therapeutics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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.

Pair Trading with Summit Therapeutics and Lipocine

The main advantage of trading using opposite Summit Therapeutics and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit 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 Summit Therapeutics PLC 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 Transaction History module to view history of all your transactions and understand their impact on performance.