Correlation Between National Vision and Patterson UTI

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

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

Diversification Opportunities for National Vision and Patterson UTI

0.18

Correlation Coefficient

National Vision  Patterson UTI

Average diversification

The 3 months correlation between National and Patterson is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings 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 National Vision 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 National Vision Holdings 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 National Vision i.e., National Vision and Patterson UTI go up and down completely randomly.

Pair Corralation between National Vision and Patterson UTI

Considering the 90-day investment horizon National Vision Holdings is expected to generate 0.83 times more return on investment than Patterson UTI. However, National Vision Holdings is 1.21 times less risky than Patterson UTI. It trades about 0.06 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.0 per unit of risk. If you would invest  1,088  in National Vision Holdings on September 13, 2024 and sell it today you would earn a total of  76.00  from holding National Vision Holdings or generate 6.99% return on investment over 90 days.

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

National Vision Holdings  vs.  Patterson UTI Energy

National Vision Holdings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, National Vision may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Patterson UTI Energy

Risk-Adjusted Performance

0 of 100

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 National Vision and Patterson UTI

The main advantage of trading using opposite National Vision and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Vision 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 National Vision Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.