Correlation Between Gap, and Patterson UTI

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

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

Diversification Opportunities for Gap, and Patterson UTI

-0.44

Correlation Coefficient

Gap,  Patterson UTI

Very good diversification

The 3 months correlation between Gap, and Patterson is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, 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 Gap, 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 The Gap, 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 Gap, i.e., Gap, and Patterson UTI go up and down completely randomly.

Pair Corralation between Gap, and Patterson UTI

Considering the 90-day investment horizon The Gap, is expected to under-perform the Patterson UTI. But the stock apears to be less risky and, when comparing its historical volatility, The Gap, is 1.13 times less risky than Patterson UTI. The stock trades about -0.03 of its potential returns per unit of risk. The Patterson UTI Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  853.00  in Patterson UTI Energy on December 2, 2024 and sell it today you would lose (22.00) from holding Patterson UTI Energy or give up 2.58% of portfolio value over 90 days.

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

The Gap,  vs.  Patterson UTI Energy

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Patterson UTI Energy

Risk-Adjusted Performance

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 Gap, and Patterson UTI

The main advantage of trading using opposite Gap, and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.