Correlation Between Patterson UTI and GENERAL

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

Diversification Opportunities for Patterson UTI and GENERAL

-0.51

Correlation Coefficient

Patterson UTI  GENERAL

Excellent diversification

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

Pair Corralation between Patterson UTI and GENERAL

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 2.05 times more return on investment than GENERAL. However, Patterson UTI is 2.05 times more volatile than GENERAL ELEC CAP. It trades about 0.07 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.02 per unit of risk. If you would invest  761.00  in Patterson UTI Energy on December 24, 2024 and sell it today you would earn a total of  85.00  from holding Patterson UTI Energy or generate 11.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	45.9%
Values	Daily Returns

Patterson UTI Energy  vs.  GENERAL ELEC CAP

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 5 (%) 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.

GENERAL ELEC CAP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Patterson UTI and GENERAL

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

The idea behind Patterson UTI Energy and GENERAL ELEC CAP 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.