Correlation Between Patterson UTI and Balchem

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

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

Diversification Opportunities for Patterson UTI and Balchem

-0.24

Correlation Coefficient

Patterson UTI  Balchem

Very good diversification

The 3 months correlation between Patterson and Balchem is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Patterson UTI 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 Patterson UTI Energy are associated (or correlated) with Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of Patterson UTI i.e., Patterson UTI and Balchem go up and down completely randomly.

Pair Corralation between Patterson UTI and Balchem

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 1.9 times more return on investment than Balchem. However, Patterson UTI is 1.9 times more volatile than Balchem. It trades about 0.11 of its potential returns per unit of risk. Balchem is currently generating about -0.01 per unit of risk. If you would invest  789.00  in Patterson UTI Energy on October 24, 2024 and sell it today you would earn a total of  136.00  from holding Patterson UTI Energy or generate 17.24% return on investment over 90 days.

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

Patterson UTI Energy  vs.  Balchem

Patterson UTI Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 8 (%) 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.

Balchem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balchem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Balchem is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Patterson UTI and Balchem

The main advantage of trading using opposite Patterson UTI and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson UTI position performs unexpectedly, Balchem 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 Balchem will offset losses from the drop in Balchem's long position.

The idea behind Patterson UTI Energy and Balchem 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.