Correlation Between East Africa and Patterson UTI

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

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

Diversification Opportunities for East Africa and Patterson UTI

0.0

Correlation Coefficient

East Africa  Patterson UTI

Pay attention - limited upside

The 3 months correlation between East and Patterson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals 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 East Africa 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 East Africa Metals 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 East Africa i.e., East Africa and Patterson UTI go up and down completely randomly.

Pair Corralation between East Africa and Patterson UTI

If you would invest  803.00  in Patterson UTI Energy on December 28, 2024 and sell it today you would earn a total of  16.00  from holding Patterson UTI Energy or generate 1.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

East Africa Metals  vs.  Patterson UTI Energy

East Africa Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, East Africa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Patterson UTI Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 2 (%) 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 East Africa and Patterson UTI

The main advantage of trading using opposite East Africa and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa 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 East Africa Metals 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.

Check out your portfolio center.

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.