Correlation Between Griffon and Patterson UTI

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

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

Diversification Opportunities for Griffon and Patterson UTI

0.25

Correlation Coefficient

Griffon  Patterson UTI

Modest diversification

The 3 months correlation between Griffon and Patterson is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Griffon 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 Griffon 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 Griffon 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 Griffon i.e., Griffon and Patterson UTI go up and down completely randomly.

Pair Corralation between Griffon and Patterson UTI

Considering the 90-day investment horizon Griffon is expected to generate 1.15 times more return on investment than Patterson UTI. However, Griffon is 1.15 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 0.01 per unit of risk. If you would invest  6,424  in Griffon on September 23, 2024 and sell it today you would earn a total of  860.00  from holding Griffon or generate 13.39% return on investment over 90 days.

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

Griffon  vs.  Patterson UTI Energy

Griffon

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Griffon 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

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 latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Griffon and Patterson UTI

The main advantage of trading using opposite Griffon and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Griffon 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 Griffon 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 Global Correlations module to find global opportunities by holding instruments from different markets.