Correlation Between Drilling Tools and Lipocine

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

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

Diversification Opportunities for Drilling Tools and Lipocine

-0.13

Correlation Coefficient

Drilling Tools  Lipocine

Good diversification

The 3 months correlation between Drilling and Lipocine is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine and Drilling Tools 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 Drilling Tools International 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 Drilling Tools i.e., Drilling Tools and Lipocine go up and down completely randomly.

Pair Corralation between Drilling Tools and Lipocine

Considering the 90-day investment horizon Drilling Tools International is expected to generate 0.67 times more return on investment than Lipocine. However, Drilling Tools International is 1.48 times less risky than Lipocine. It trades about 0.15 of its potential returns per unit of risk. Lipocine is currently generating about -0.03 per unit of risk. If you would invest  320.00  in Drilling Tools International on October 26, 2024 and sell it today you would earn a total of  22.00  from holding Drilling Tools International or generate 6.88% return on investment over 90 days.

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

Drilling Tools International  vs.  Lipocine

Drilling Tools Inter

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Drilling Tools may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Drilling Tools and Lipocine

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

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.