Correlation Between Kaiser Aluminum and Patterson UTI

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

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

Diversification Opportunities for Kaiser Aluminum and Patterson UTI

0.35

Correlation Coefficient

Kaiser Aluminum  Patterson UTI

Weak diversification

The 3 months correlation between Kaiser and Patterson is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Patterson UTI go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Patterson UTI

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 1.01 times more return on investment than Patterson UTI. However, Kaiser Aluminum is 1.01 times more volatile than Patterson UTI Energy. It trades about -0.04 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about -0.06 per unit of risk. If you would invest  8,594  in Kaiser Aluminum on September 23, 2024 and sell it today you would lose (1,616) from holding Kaiser Aluminum or give up 18.8% of portfolio value over 90 days.

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

Kaiser Aluminum  vs.  Patterson UTI Energy

Kaiser Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 Kaiser Aluminum and Patterson UTI

The main advantage of trading using opposite Kaiser Aluminum and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.