Correlation Between Direct Line and Lipocine
Can any of the company-specific risk be diversified away by investing in both Direct Line 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 Direct Line and Lipocine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direct Line Insurance and Lipocine, you can compare the effects of market volatilities on Direct Line 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 Direct Line with a short position of Lipocine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Line and Lipocine.
Diversification Opportunities for Direct Line and Lipocine
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direct and Lipocine is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Direct Line Insurance and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Direct Line 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 Direct Line Insurance 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 Direct Line i.e., Direct Line and Lipocine go up and down completely randomly.
Pair Corralation between Direct Line and Lipocine
Assuming the 90 days horizon Direct Line is expected to generate 1.29 times less return on investment than Lipocine. But when comparing it to its historical volatility, Direct Line Insurance is 1.07 times less risky than Lipocine. It trades about 0.08 of its potential returns per unit of risk. Lipocine is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 365.00 in Lipocine on September 3, 2024 and sell it today you would earn a total of 89.00 from holding Lipocine or generate 24.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direct Line Insurance vs. Lipocine
Performance |
| Timeline |
| Direct Line Insurance |
| Lipocine |
Direct Line and Lipocine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direct Line and Lipocine
The main advantage of trading using opposite Direct Line and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direct Line 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.| Direct Line vs. Lipocine | Direct Line vs. Spyre Therapeutics | Direct Line vs. Atmos Energy | Direct Line vs. Regeneron Pharmaceuticals |
| Lipocine vs. Seres Therapeutics | Lipocine vs. DiaMedica Therapeutics | Lipocine vs. Lyra Therapeutics | Lipocine vs. Centessa Pharmaceuticals PLC |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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