Correlation Between Pembina Pipeline and Patterson UTI

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

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

Diversification Opportunities for Pembina Pipeline and Patterson UTI

-0.31

Correlation Coefficient

Pembina Pipeline  Patterson UTI

Very good diversification

The 3 months correlation between Pembina and Patterson is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline i.e., Pembina Pipeline and Patterson UTI go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Patterson UTI

Assuming the 90 days horizon Pembina Pipeline is expected to generate 16.06 times less return on investment than Patterson UTI. But when comparing it to its historical volatility, Pembina Pipeline is 15.65 times less risky than Patterson UTI. It trades about 0.08 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  745.00  in Patterson UTI Energy on December 22, 2024 and sell it today you would earn a total of  93.00  from holding Patterson UTI Energy or generate 12.48% return on investment over 90 days.

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

Pembina Pipeline  vs.  Patterson UTI Energy

Pembina Pipeline

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Patterson UTI Energy

Risk-Adjusted Performance

Modest

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 Pembina Pipeline and Patterson UTI

The main advantage of trading using opposite Pembina Pipeline and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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 Pembina Pipeline 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..