Correlation Between Patterson UTI and 718549AB4

Can any of the company-specific risk be diversified away by investing in both Patterson UTI and 718549AB4 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 718549AB4 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 Phillips 66 Partners, you can compare the effects of market volatilities on Patterson UTI and 718549AB4 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 718549AB4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson UTI and 718549AB4.

Diversification Opportunities for Patterson UTI and 718549AB4

-0.34

Correlation Coefficient

Patterson UTI  718549AB4

Very good diversification

The 3 months correlation between Patterson and 718549AB4 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Phillips 66 Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 Partners 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 718549AB4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 Partners has no effect on the direction of Patterson UTI i.e., Patterson UTI and 718549AB4 go up and down completely randomly.

Pair Corralation between Patterson UTI and 718549AB4

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 2.04 times more return on investment than 718549AB4. However, Patterson UTI is 2.04 times more volatile than Phillips 66 Partners. It trades about 0.17 of its potential returns per unit of risk. Phillips 66 Partners 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 Against
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Patterson UTI Energy  vs.  Phillips 66 Partners

Patterson UTI Energy

Risk-Adjusted Performance

2 of 100

Insignificant

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.

Phillips 66 Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phillips 66 Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Phillips 66 Partners investors.

Pair Trading with Patterson UTI and 718549AB4

The main advantage of trading using opposite Patterson UTI and 718549AB4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson UTI position performs unexpectedly, 718549AB4 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 718549AB4 will offset losses from the drop in 718549AB4's long position.

The idea behind Patterson UTI Energy and Phillips 66 Partners 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.