Correlation Between Transport International and Patterson-UTI Energy

Can any of the company-specific risk be diversified away by investing in both Transport International 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 Transport International 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 Transport International Holdings and Patterson UTI Energy, you can compare the effects of market volatilities on Transport International 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 Transport International with a short position of Patterson-UTI Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport International and Patterson-UTI Energy.

Diversification Opportunities for Transport International and Patterson-UTI Energy

0.11

Correlation Coefficient

Transport International  Patterson-UTI Energy

Average diversification

The 3 months correlation between Transport and Patterson-UTI is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin 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 Transport International 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 Transport International Holdings 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 Transport International i.e., Transport International and Patterson-UTI Energy go up and down completely randomly.

Pair Corralation between Transport International and Patterson-UTI Energy

Assuming the 90 days horizon Transport International is expected to generate 94.21 times less return on investment than Patterson-UTI Energy. But when comparing it to its historical volatility, Transport International Holdings is 1.81 times less risky than Patterson-UTI Energy. It trades about 0.0 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  738.00  in Patterson UTI Energy on December 26, 2024 and sell it today you would earn a total of  32.00  from holding Patterson UTI Energy or generate 4.34% return on investment over 90 days.

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

Transport International Holdin  vs.  Patterson UTI Energy

Transport International

Risk-Adjusted Performance

Very Weak

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

Patterson UTI Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Patterson-UTI Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Transport International and Patterson-UTI Energy

The main advantage of trading using opposite Transport International and Patterson-UTI Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport International 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 Transport International Holdings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.