Correlation Between Chemours and Patterson UTI

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

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

Diversification Opportunities for Chemours and Patterson UTI

0.42

Correlation Coefficient

Chemours  Patterson UTI

Very weak diversification

The 3 months correlation between Chemours and Patterson is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Chemours Co 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 Chemours 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 Chemours Co 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 Chemours i.e., Chemours and Patterson UTI go up and down completely randomly.

Pair Corralation between Chemours and Patterson UTI

Allowing for the 90-day total investment horizon Chemours Co is expected to under-perform the Patterson UTI. But the stock apears to be less risky and, when comparing its historical volatility, Chemours Co is 1.11 times less risky than Patterson UTI. The stock trades about -0.42 of its potential returns per unit of risk. The Patterson UTI Energy is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  854.00  in Patterson UTI Energy on September 24, 2024 and sell it today you would lose (86.00) from holding Patterson UTI Energy or give up 10.07% of portfolio value over 90 days.

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

Chemours Co  vs.  Patterson UTI Energy

Chemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Chemours is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Patterson UTI Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patterson UTI Energy has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Chemours and Patterson UTI

The main advantage of trading using opposite Chemours and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemours 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 Chemours Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.