Correlation Between Patterson UTI and Bowhead Specialty

Can any of the company-specific risk be diversified away by investing in both Patterson UTI and Bowhead Specialty 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 Bowhead Specialty 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 Bowhead Specialty Holdings, you can compare the effects of market volatilities on Patterson UTI and Bowhead Specialty 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 Bowhead Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson UTI and Bowhead Specialty.

Diversification Opportunities for Patterson UTI and Bowhead Specialty

-0.57

Correlation Coefficient

Patterson UTI  Bowhead Specialty

Excellent diversification

The 3 months correlation between Patterson and Bowhead is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Bowhead Specialty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowhead Specialty 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 Bowhead Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowhead Specialty has no effect on the direction of Patterson UTI i.e., Patterson UTI and Bowhead Specialty go up and down completely randomly.

Pair Corralation between Patterson UTI and Bowhead Specialty

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 1.34 times more return on investment than Bowhead Specialty. However, Patterson UTI is 1.34 times more volatile than Bowhead Specialty Holdings. It trades about 0.02 of its potential returns per unit of risk. Bowhead Specialty Holdings is currently generating about -0.04 per unit of risk. If you would invest  819.00  in Patterson UTI Energy on December 4, 2024 and sell it today you would earn a total of  12.00  from holding Patterson UTI Energy or generate 1.47% return on investment over 90 days.

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

Patterson UTI Energy  vs.  Bowhead Specialty Holdings

Patterson UTI Energy

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Bowhead Specialty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bowhead Specialty Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Bowhead Specialty is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Patterson UTI and Bowhead Specialty

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

The idea behind Patterson UTI Energy and Bowhead Specialty Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.