Correlation Between ON Semiconductor and Patterson UTI

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

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

Diversification Opportunities for ON Semiconductor and Patterson UTI

-0.58

Correlation Coefficient

ON Semiconductor  Patterson UTI

Excellent diversification

The 3 months correlation between ON Semiconductor and Patterson is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding ON Semiconductor 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 ON Semiconductor 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 ON Semiconductor 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 ON Semiconductor i.e., ON Semiconductor and Patterson UTI go up and down completely randomly.

Pair Corralation between ON Semiconductor and Patterson UTI

Allowing for the 90-day total investment horizon ON Semiconductor is expected to under-perform the Patterson UTI. In addition to that, ON Semiconductor is 1.17 times more volatile than Patterson UTI Energy. It trades about -0.22 of its total potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.08 per unit of volatility. If you would invest  854.00  in Patterson UTI Energy on October 25, 2024 and sell it today you would earn a total of  59.00  from holding Patterson UTI Energy or generate 6.91% return on investment over 90 days.

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

ON Semiconductor  vs.  Patterson UTI Energy

ON Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ON Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Patterson UTI Energy

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 6 (%) 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 ON Semiconductor and Patterson UTI

The main advantage of trading using opposite ON Semiconductor and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ON Semiconductor 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 ON Semiconductor 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.