Correlation Between Patterson UTI and NETGEAR

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

Diversification Opportunities for Patterson UTI and NETGEAR

0.51

Correlation Coefficient

Patterson UTI  NETGEAR

Very weak diversification

The 3 months correlation between Patterson and NETGEAR is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Patterson UTI i.e., Patterson UTI and NETGEAR go up and down completely randomly.

Pair Corralation between Patterson UTI and NETGEAR

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 1.07 times more return on investment than NETGEAR. However, Patterson UTI is 1.07 times more volatile than NETGEAR. It trades about 0.08 of its potential returns per unit of risk. NETGEAR is currently generating about -0.07 per unit of risk. If you would invest  745.00  in Patterson UTI Energy on December 22, 2024 and sell it today you would earn a total of  93.00  from holding Patterson UTI Energy or generate 12.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Patterson UTI Energy  vs.  NETGEAR

Patterson UTI Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 6 (%) 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.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Patterson UTI and NETGEAR

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

The idea behind Patterson UTI Energy and NETGEAR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.