Correlation Between Patterson UTI and BW Offshore

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

Diversification Opportunities for Patterson UTI and BW Offshore

0.0

Correlation Coefficient

Patterson UTI  BW Offshore

Pay attention - limited upside

The 3 months correlation between Patterson and BWOFY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore Limited has no effect on the direction of Patterson UTI i.e., Patterson UTI and BW Offshore go up and down completely randomly.

Pair Corralation between Patterson UTI and BW Offshore

Given the investment horizon of 90 days Patterson UTI Energy is expected to under-perform the BW Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Patterson UTI Energy is 1.07 times less risky than BW Offshore. The stock trades about -0.01 of its potential returns per unit of risk. The BW Offshore Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  473.00  in BW Offshore Limited on September 16, 2024 and sell it today you would earn a total of  82.00  from holding BW Offshore Limited or generate 17.34% return on investment over 90 days.

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

Patterson UTI Energy  vs.  BW Offshore Limited

Patterson UTI Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patterson UTI Energy has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

BW Offshore Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, BW Offshore showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Patterson UTI and BW Offshore

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

The idea behind Patterson UTI Energy and BW Offshore Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.