Correlation Between Analog Devices and Patterson UTI

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

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

Diversification Opportunities for Analog Devices and Patterson UTI

0.11

Correlation Coefficient

Analog Devices  Patterson UTI

Average diversification

The 3 months correlation between Analog and Patterson is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices 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 Analog Devices 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 Analog Devices are associated (or correlated) with Patterson UTI. 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 Analog Devices i.e., Analog Devices and Patterson UTI go up and down completely randomly.

Pair Corralation between Analog Devices and Patterson UTI

Considering the 90-day investment horizon Analog Devices is expected to under-perform the Patterson UTI. But the stock apears to be less risky and, when comparing its historical volatility, Analog Devices is 1.82 times less risky than Patterson UTI. The stock trades about 0.0 of its potential returns per unit of risk. The Patterson UTI Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  762.00  in Patterson UTI Energy on October 6, 2024 and sell it today you would earn a total of  95.00  from holding Patterson UTI Energy or generate 12.47% return on investment over 90 days.

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

Analog Devices  vs.  Patterson UTI Energy

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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. 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.

Pair Trading with Analog Devices and Patterson UTI

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

The idea behind Analog Devices 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.