Correlation Between Patterson UTI and Grocery Outlet

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

Diversification Opportunities for Patterson UTI and Grocery Outlet

0.25

Correlation Coefficient

Patterson UTI  Grocery Outlet

Modest diversification

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

Pair Corralation between Patterson UTI and Grocery Outlet

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 0.64 times more return on investment than Grocery Outlet. However, Patterson UTI Energy is 1.55 times less risky than Grocery Outlet. It trades about 0.17 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.25 per unit of risk. If you would invest  784.00  in Patterson UTI Energy on October 11, 2024 and sell it today you would earn a total of  58.00  from holding Patterson UTI Energy or generate 7.4% 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.  Grocery Outlet Holding

Patterson UTI Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 2 (%) 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.

Grocery Outlet Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Grocery Outlet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Patterson UTI and Grocery Outlet

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

The idea behind Patterson UTI Energy and Grocery Outlet Holding 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.