Correlation Between ODFJELL DRILLLTD and Patterson-UTI Energy

Can any of the company-specific risk be diversified away by investing in both ODFJELL DRILLLTD 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 ODFJELL DRILLLTD 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 ODFJELL DRILLLTD DL 01 and Patterson UTI Energy, you can compare the effects of market volatilities on ODFJELL DRILLLTD 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 ODFJELL DRILLLTD with a short position of Patterson-UTI Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ODFJELL DRILLLTD and Patterson-UTI Energy.

Diversification Opportunities for ODFJELL DRILLLTD and Patterson-UTI Energy

0.63

Correlation Coefficient

ODFJELL DRILLLTD  Patterson-UTI Energy

Poor diversification

The 3 months correlation between ODFJELL and Patterson-UTI is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ODFJELL DRILLLTD DL 01 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 ODFJELL DRILLLTD 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 ODFJELL DRILLLTD DL 01 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 ODFJELL DRILLLTD i.e., ODFJELL DRILLLTD and Patterson-UTI Energy go up and down completely randomly.

Pair Corralation between ODFJELL DRILLLTD and Patterson-UTI Energy

Assuming the 90 days horizon ODFJELL DRILLLTD DL 01 is expected to generate 1.15 times more return on investment than Patterson-UTI Energy. However, ODFJELL DRILLLTD is 1.15 times more volatile than Patterson UTI Energy. It trades about 0.03 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  393.00  in ODFJELL DRILLLTD DL 01 on September 3, 2024 and sell it today you would earn a total of  15.00  from holding ODFJELL DRILLLTD DL 01 or generate 3.82% return on investment over 90 days.

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

ODFJELL DRILLLTD DL 01  vs.  Patterson UTI Energy

ODFJELL DRILLLTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ODFJELL DRILLLTD DL 01 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ODFJELL DRILLLTD 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. Despite nearly stable basic indicators, Patterson-UTI Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ODFJELL DRILLLTD and Patterson-UTI Energy

The main advantage of trading using opposite ODFJELL DRILLLTD and Patterson-UTI Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ODFJELL DRILLLTD 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 ODFJELL DRILLLTD DL 01 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.