Correlation Between GMO Internet and Patterson UTI

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

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

Diversification Opportunities for GMO Internet and Patterson UTI

-0.44

Correlation Coefficient

GMO Internet  Patterson UTI

Very good diversification

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

Pair Corralation between GMO Internet and Patterson UTI

Assuming the 90 days horizon GMO Internet is expected to generate 10.33 times less return on investment than Patterson UTI. But when comparing it to its historical volatility, GMO Internet is 1.36 times less risky than Patterson UTI. It trades about 0.01 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  790.00  in Patterson UTI Energy on October 26, 2024 and sell it today you would earn a total of  112.00  from holding Patterson UTI Energy or generate 14.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

GMO Internet  vs.  Patterson UTI Energy

GMO Internet

Risk-Adjusted Performance

0 of 100

Very Weak

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

Patterson UTI Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Patterson UTI displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMO Internet and Patterson UTI

The main advantage of trading using opposite GMO Internet and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet 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 GMO Internet 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.