Correlation Between Lipocine and Palatin Technologies

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

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

Diversification Opportunities for Lipocine and Palatin Technologies

0.81

Correlation Coefficient

Lipocine  Palatin Technologies

Very poor diversification

The 3 months correlation between Lipocine and Palatin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lipocine and Palatin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palatin Technologies 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 Palatin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palatin Technologies has no effect on the direction of Lipocine i.e., Lipocine and Palatin Technologies go up and down completely randomly.

Pair Corralation between Lipocine and Palatin Technologies

Given the investment horizon of 90 days Lipocine is expected to under-perform the Palatin Technologies. In addition to that, Lipocine is 1.27 times more volatile than Palatin Technologies. It trades about -0.17 of its total potential returns per unit of risk. Palatin Technologies is currently generating about -0.12 per unit of volatility. If you would invest  182.00  in Palatin Technologies on June 24, 2024 and sell it today you would lose (54.00) from holding Palatin Technologies or give up 29.67% of portfolio value over 90 days.

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

Lipocine  vs.  Palatin Technologies

Lipocine

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in October 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Palatin Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palatin Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in October 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Lipocine and Palatin Technologies

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

The idea behind Lipocine and Palatin Technologies 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.