Correlation Between Vita Coco and Patterson UTI

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

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

Diversification Opportunities for Vita Coco and Patterson UTI

0.03

Correlation Coefficient

Vita Coco  Patterson UTI

Significant diversification

The 3 months correlation between Vita and Patterson is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco 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 Vita Coco 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 Vita Coco 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 Vita Coco i.e., Vita Coco and Patterson UTI go up and down completely randomly.

Pair Corralation between Vita Coco and Patterson UTI

Given the investment horizon of 90 days Vita Coco is expected to generate 1.01 times more return on investment than Patterson UTI. However, Vita Coco is 1.01 times more volatile than Patterson UTI Energy. It trades about 0.09 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about -0.04 per unit of risk. If you would invest  1,342  in Vita Coco on October 3, 2024 and sell it today you would earn a total of  2,349  from holding Vita Coco or generate 175.04% return on investment over 90 days.

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

Vita Coco  vs.  Patterson UTI Energy

Vita Coco

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Patterson UTI Energy

Risk-Adjusted Performance

1 of 100

Insignificant

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 Vita Coco and Patterson UTI

The main advantage of trading using opposite Vita Coco and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vita Coco 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 Vita Coco 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.