Correlation Between Lipocine and Alta Equipment

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

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

Diversification Opportunities for Lipocine and Alta Equipment

-0.31

Correlation Coefficient

Lipocine  Alta Equipment

Very good diversification

The 3 months correlation between Lipocine and Alta is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group 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 Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of Lipocine i.e., Lipocine and Alta Equipment go up and down completely randomly.

Pair Corralation between Lipocine and Alta Equipment

Given the investment horizon of 90 days Lipocine is expected to under-perform the Alta Equipment. But the stock apears to be less risky and, when comparing its historical volatility, Lipocine is 1.11 times less risky than Alta Equipment. The stock trades about 0.0 of its potential returns per unit of risk. The Alta Equipment Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  472.00  in Alta Equipment Group on May 6, 2025 and sell it today you would earn a total of  274.00  from holding Alta Equipment Group or generate 58.05% return on investment over 90 days.

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

Lipocine  vs.  Alta Equipment Group

Lipocine

Risk-Adjusted Performance

Very Weak

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

Alta Equipment Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lipocine and Alta Equipment

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

The idea behind Lipocine and Alta Equipment Group 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.