Correlation Between Patterson UTI and Griffon

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

Diversification Opportunities for Patterson UTI and Griffon

0.25

Correlation Coefficient

Patterson UTI  Griffon

Modest diversification

The 3 months correlation between Patterson and Griffon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon 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 Griffon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffon has no effect on the direction of Patterson UTI i.e., Patterson UTI and Griffon go up and down completely randomly.

Pair Corralation between Patterson UTI and Griffon

Given the investment horizon of 90 days Patterson UTI is expected to generate 12.09 times less return on investment than Griffon. But when comparing it to its historical volatility, Patterson UTI Energy is 1.15 times less risky than Griffon. It trades about 0.01 of its potential returns per unit of risk. Griffon is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,424  in Griffon on September 23, 2024 and sell it today you would earn a total of  860.00  from holding Griffon or generate 13.39% 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.  Griffon

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 latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Griffon

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Griffon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Patterson UTI and Griffon

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

The idea behind Patterson UTI Energy and Griffon 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.