Correlation Between BorgWarner and Patterson UTI

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

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

Diversification Opportunities for BorgWarner and Patterson UTI

-0.1

Correlation Coefficient

BorgWarner  Patterson UTI

Good diversification

The 3 months correlation between BorgWarner and Patterson is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner 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 BorgWarner 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 BorgWarner 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 BorgWarner i.e., BorgWarner and Patterson UTI go up and down completely randomly.

Pair Corralation between BorgWarner and Patterson UTI

Considering the 90-day investment horizon BorgWarner is expected to generate 0.69 times more return on investment than Patterson UTI. However, BorgWarner is 1.45 times less risky than Patterson UTI. It trades about -0.01 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about -0.02 per unit of risk. If you would invest  3,956  in BorgWarner on October 21, 2024 and sell it today you would lose (727.00) from holding BorgWarner or give up 18.38% of portfolio value over 90 days.

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

BorgWarner  vs.  Patterson UTI Energy

BorgWarner

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BorgWarner has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BorgWarner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Patterson UTI Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Patterson UTI displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BorgWarner and Patterson UTI

The main advantage of trading using opposite BorgWarner and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner 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 BorgWarner 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.