Correlation Between TSOGO SUN and Patterson-UTI Energy

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

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

Diversification Opportunities for TSOGO SUN and Patterson-UTI Energy

0.41

Correlation Coefficient

TSOGO SUN  Patterson-UTI Energy

Very weak diversification

The 3 months correlation between TSOGO and Patterson-UTI is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding TSOGO SUN GAMING 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 TSOGO SUN 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 TSOGO SUN GAMING are associated (or correlated) with Patterson-UTI Energy. 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 TSOGO SUN i.e., TSOGO SUN and Patterson-UTI Energy go up and down completely randomly.

Pair Corralation between TSOGO SUN and Patterson-UTI Energy

Assuming the 90 days horizon TSOGO SUN GAMING is expected to generate 4.66 times more return on investment than Patterson-UTI Energy. However, TSOGO SUN is 4.66 times more volatile than Patterson UTI Energy. It trades about 0.1 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.15 per unit of risk. If you would invest  28.00  in TSOGO SUN GAMING on October 22, 2024 and sell it today you would earn a total of  20.00  from holding TSOGO SUN GAMING or generate 71.43% return on investment over 90 days.

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

TSOGO SUN GAMING  vs.  Patterson UTI Energy

TSOGO SUN GAMING

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TSOGO SUN GAMING are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TSOGO SUN reported solid returns over the last few months and may actually be approaching a breakup point.

Patterson UTI Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Patterson-UTI Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TSOGO SUN and Patterson-UTI Energy

The main advantage of trading using opposite TSOGO SUN and Patterson-UTI Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSOGO SUN position performs unexpectedly, Patterson-UTI Energy 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 Energy will offset losses from the drop in Patterson-UTI Energy's long position.

The idea behind TSOGO SUN GAMING 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.