Correlation Between Patterson UTI and BorgWarner

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

Diversification Opportunities for Patterson UTI and BorgWarner

0.26

Correlation Coefficient

Patterson UTI  BorgWarner

Modest diversification

The 3 months correlation between Patterson and BorgWarner is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner 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 BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of Patterson UTI i.e., Patterson UTI and BorgWarner go up and down completely randomly.

Pair Corralation between Patterson UTI and BorgWarner

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 1.76 times more return on investment than BorgWarner. However, Patterson UTI is 1.76 times more volatile than BorgWarner. It trades about 0.02 of its potential returns per unit of risk. BorgWarner is currently generating about -0.11 per unit of risk. If you would invest  848.00  in Patterson UTI Energy on October 5, 2024 and sell it today you would earn a total of  8.50  from holding Patterson UTI Energy or generate 1.0% return on investment over 90 days.

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

Patterson UTI Energy  vs.  BorgWarner

Patterson UTI Energy

Risk-Adjusted Performance

1 of 100

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.

BorgWarner

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BorgWarner has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Patterson UTI and BorgWarner

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

The idea behind Patterson UTI Energy and BorgWarner 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.