Correlation Between Maanshan Iron and Patterson UTI

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

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

Diversification Opportunities for Maanshan Iron and Patterson UTI

-0.16

Correlation Coefficient

Maanshan Iron  Patterson UTI

Good diversification

The 3 months correlation between Maanshan and Patterson is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Maanshan Iron Steel 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 Maanshan Iron 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 Maanshan Iron Steel 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 Maanshan Iron i.e., Maanshan Iron and Patterson UTI go up and down completely randomly.

Pair Corralation between Maanshan Iron and Patterson UTI

Assuming the 90 days horizon Maanshan Iron Steel is expected to under-perform the Patterson UTI. In addition to that, Maanshan Iron is 1.52 times more volatile than Patterson UTI Energy. It trades about -0.01 of its total potential returns per unit of risk. Patterson UTI Energy is currently generating about -0.01 per unit of volatility. If you would invest  873.00  in Patterson UTI Energy on September 3, 2024 and sell it today you would lose (33.00) from holding Patterson UTI Energy or give up 3.78% of portfolio value over 90 days.

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

Maanshan Iron Steel  vs.  Patterson UTI Energy

Maanshan Iron Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 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 Maanshan Iron and Patterson UTI

The main advantage of trading using opposite Maanshan Iron and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maanshan Iron 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 Maanshan Iron Steel 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 Transaction History module to view history of all your transactions and understand their impact on performance.