Correlation Between Verrica Pharmaceuticals and Lipocine

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

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

Diversification Opportunities for Verrica Pharmaceuticals and Lipocine

-0.51

Correlation Coefficient

Verrica Pharmaceuticals  Lipocine

Excellent diversification

The 3 months correlation between Verrica and Lipocine is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Verrica Pharmaceuticals and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Verrica Pharmaceuticals 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 Verrica Pharmaceuticals 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 Verrica Pharmaceuticals i.e., Verrica Pharmaceuticals and Lipocine go up and down completely randomly.

Pair Corralation between Verrica Pharmaceuticals and Lipocine

Given the investment horizon of 90 days Verrica Pharmaceuticals is expected to under-perform the Lipocine. In addition to that, Verrica Pharmaceuticals is 1.99 times more volatile than Lipocine. It trades about -0.04 of its total potential returns per unit of risk. Lipocine is currently generating about 0.07 per unit of volatility. If you would invest  372.00  in Lipocine on September 4, 2024 and sell it today you would earn a total of  58.00  from holding Lipocine or generate 15.59% return on investment over 90 days.

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

Verrica Pharmaceuticals  vs.  Lipocine

Verrica Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verrica Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lipocine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 5 (%) 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 Verrica Pharmaceuticals and Lipocine

The main advantage of trading using opposite Verrica Pharmaceuticals and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verrica Pharmaceuticals 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 Verrica Pharmaceuticals 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.