Correlation Between Patterson UTI and Lipocine

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

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

Diversification Opportunities for Patterson UTI and Lipocine

-0.25

Correlation Coefficient

Patterson UTI  Lipocine

Very good diversification

The 3 months correlation between Patterson and Lipocine is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Patterson UTI 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 Patterson UTI Energy 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 Patterson UTI i.e., Patterson UTI and Lipocine go up and down completely randomly.

Pair Corralation between Patterson UTI and Lipocine

Given the investment horizon of 90 days Patterson UTI Energy is expected to under-perform the Lipocine. But the stock apears to be less risky and, when comparing its historical volatility, Patterson UTI Energy is 2.19 times less risky than Lipocine. The stock trades about -0.04 of its potential returns per unit of risk. The Lipocine is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  293.00  in Lipocine on September 16, 2024 and sell it today you would earn a total of  209.00  from holding Lipocine or generate 71.33% return on investment over 90 days.

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

Patterson UTI Energy  vs.  Lipocine

Patterson UTI Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lipocine

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Lipocine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Patterson UTI and Lipocine

The main advantage of trading using opposite Patterson UTI and Lipocine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson UTI 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.

The idea behind Patterson UTI Energy and Lipocine 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.