Correlation Between Patterson UTI and Gap,

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

Diversification Opportunities for Patterson UTI and Gap,

0.05

Correlation Coefficient

Patterson UTI  Gap,

Significant diversification

The 3 months correlation between Patterson and Gap, is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Patterson UTI i.e., Patterson UTI and Gap, go up and down completely randomly.

Pair Corralation between Patterson UTI and Gap,

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 0.98 times more return on investment than Gap,. However, Patterson UTI Energy is 1.02 times less risky than Gap,. It trades about 0.56 of its potential returns per unit of risk. The Gap, is currently generating about -0.05 per unit of risk. If you would invest  768.00  in Patterson UTI Energy on October 21, 2024 and sell it today you would earn a total of  161.00  from holding Patterson UTI Energy or generate 20.96% return on investment over 90 days.

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

Patterson UTI Energy  vs.  The Gap,

Patterson UTI Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 9 (%) 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.

Gap,

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Gap, may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Patterson UTI and Gap,

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

The idea behind Patterson UTI Energy and The Gap, 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.