Correlation Between ASE Industrial and Patterson UTI

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

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

Diversification Opportunities for ASE Industrial and Patterson UTI

0.59

Correlation Coefficient

ASE Industrial  Patterson UTI

Very weak diversification

The 3 months correlation between ASE and Patterson is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding 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 ASE Industrial 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 ASE Industrial Holding 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 ASE Industrial i.e., ASE Industrial and Patterson UTI go up and down completely randomly.

Pair Corralation between ASE Industrial and Patterson UTI

Considering the 90-day investment horizon ASE Industrial is expected to generate 20.41 times less return on investment than Patterson UTI. But when comparing it to its historical volatility, ASE Industrial Holding is 1.07 times less risky than Patterson UTI. It trades about 0.0 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  722.00  in Patterson UTI Energy on December 19, 2024 and sell it today you would earn a total of  70.00  from holding Patterson UTI Energy or generate 9.7% return on investment over 90 days.

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

ASE Industrial Holding  vs.  Patterson UTI Energy

ASE Industrial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASE Industrial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ASE Industrial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Patterson UTI Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Patterson UTI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ASE Industrial and Patterson UTI

The main advantage of trading using opposite ASE Industrial and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial 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 ASE Industrial Holding 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.