Correlation Between Lifecore Biomedical and ACRX Old

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

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

Diversification Opportunities for Lifecore Biomedical and ACRX Old

-0.47

Correlation Coefficient

Lifecore Biomedical  ACRX Old

Very good diversification

The 3 months correlation between Lifecore and ACRX is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lifecore Biomedical and ACRX Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACRX Old and Lifecore Biomedical 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 Lifecore Biomedical are associated (or correlated) with ACRX Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACRX Old has no effect on the direction of Lifecore Biomedical i.e., Lifecore Biomedical and ACRX Old go up and down completely randomly.

Pair Corralation between Lifecore Biomedical and ACRX Old

Given the investment horizon of 90 days Lifecore Biomedical is expected to generate 1.5 times more return on investment than ACRX Old. However, Lifecore Biomedical is 1.5 times more volatile than ACRX Old. It trades about -0.06 of its potential returns per unit of risk. ACRX Old is currently generating about -0.41 per unit of risk. If you would invest  818.00  in Lifecore Biomedical on February 1, 2024 and sell it today you would lose (176.00) from holding Lifecore Biomedical or give up 21.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	19.51%
Values	Daily Returns

Lifecore Biomedical  vs.  ACRX Old

Lifecore Biomedical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lifecore Biomedical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Lifecore Biomedical may actually be approaching a critical reversion point that can send shares even higher in June 2024.

ACRX Old

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days ACRX Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly conflicting basic indicators, ACRX Old showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lifecore Biomedical and ACRX Old

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

The idea behind Lifecore Biomedical and ACRX Old 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.