Correlation Between Alimera Sciences and Lucy Scientific

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

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

Diversification Opportunities for Alimera Sciences and Lucy Scientific

-0.04

Correlation Coefficient

Alimera Sciences  Lucy Scientific

Good diversification

The 3 months correlation between Alimera and Lucy is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alimera Sciences and Lucy Scientific Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucy Scientific Discovery and Alimera Sciences 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 Alimera Sciences are associated (or correlated) with Lucy Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucy Scientific Discovery has no effect on the direction of Alimera Sciences i.e., Alimera Sciences and Lucy Scientific go up and down completely randomly.

Pair Corralation between Alimera Sciences and Lucy Scientific

Given the investment horizon of 90 days Alimera Sciences is expected to generate 0.5 times more return on investment than Lucy Scientific. However, Alimera Sciences is 2.0 times less risky than Lucy Scientific. It trades about -0.02 of its potential returns per unit of risk. Lucy Scientific Discovery is currently generating about -0.21 per unit of risk. If you would invest  387.00  in Alimera Sciences on February 5, 2024 and sell it today you would lose (22.00) from holding Alimera Sciences or give up 5.68% of portfolio value over 90 days.

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

Alimera Sciences  vs.  Lucy Scientific Discovery

Alimera Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lucy Scientific Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucy Scientific Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Alimera Sciences and Lucy Scientific

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

The idea behind Alimera Sciences and Lucy Scientific Discovery 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.