Correlation Between Aedas Homes and Patterson-UTI Energy

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

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

Diversification Opportunities for Aedas Homes and Patterson-UTI Energy

-0.36

Correlation Coefficient

Aedas Homes  Patterson-UTI Energy

Very good diversification

The 3 months correlation between Aedas and Patterson-UTI is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and Patterson UTI Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson UTI Energy and Aedas Homes 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 Aedas Homes SA are associated (or correlated) with Patterson-UTI Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson UTI Energy has no effect on the direction of Aedas Homes i.e., Aedas Homes and Patterson-UTI Energy go up and down completely randomly.

Pair Corralation between Aedas Homes and Patterson-UTI Energy

Assuming the 90 days horizon Aedas Homes SA is expected to generate 0.6 times more return on investment than Patterson-UTI Energy. However, Aedas Homes SA is 1.66 times less risky than Patterson-UTI Energy. It trades about 0.11 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about -0.03 per unit of risk. If you would invest  1,037  in Aedas Homes SA on October 4, 2024 and sell it today you would earn a total of  1,473  from holding Aedas Homes SA or generate 142.04% return on investment over 90 days.

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

Aedas Homes SA  vs.  Patterson UTI Energy

Aedas Homes SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aedas Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Patterson UTI Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Patterson-UTI Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aedas Homes and Patterson-UTI Energy

The main advantage of trading using opposite Aedas Homes and Patterson-UTI Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aedas Homes position performs unexpectedly, Patterson-UTI Energy 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 Patterson-UTI Energy will offset losses from the drop in Patterson-UTI Energy's long position.

The idea behind Aedas Homes SA and Patterson UTI Energy 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.