Correlation Between Patterson UTI and Chemours

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

Diversification Opportunities for Patterson UTI and Chemours

0.42

Correlation Coefficient

Patterson UTI  Chemours

Very weak diversification

The 3 months correlation between Patterson and Chemours is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours 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 Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Patterson UTI i.e., Patterson UTI and Chemours go up and down completely randomly.

Pair Corralation between Patterson UTI and Chemours

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 1.11 times more return on investment than Chemours. However, Patterson UTI is 1.11 times more volatile than Chemours Co. It trades about -0.18 of its potential returns per unit of risk. Chemours Co is currently generating about -0.42 per unit of risk. If you would invest  854.00  in Patterson UTI Energy on September 24, 2024 and sell it today you would lose (86.00) from holding Patterson UTI Energy or give up 10.07% of portfolio value over 90 days.

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

Patterson UTI Energy  vs.  Chemours Co

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.

Chemours

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Patterson UTI and Chemours

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

The idea behind Patterson UTI Energy and Chemours Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.