Correlation Between Patterson UTI and 8426EPAD0

Can any of the company-specific risk be diversified away by investing in both Patterson UTI and 8426EPAD0 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 8426EPAD0 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 US8426EPAD09, you can compare the effects of market volatilities on Patterson UTI and 8426EPAD0 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 8426EPAD0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson UTI and 8426EPAD0.

Diversification Opportunities for Patterson UTI and 8426EPAD0

-0.08

Correlation Coefficient

Patterson UTI  8426EPAD0

Good diversification

The 3 months correlation between Patterson and 8426EPAD0 is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and US8426EPAD09 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US8426EPAD09 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 8426EPAD0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US8426EPAD09 has no effect on the direction of Patterson UTI i.e., Patterson UTI and 8426EPAD0 go up and down completely randomly.

Pair Corralation between Patterson UTI and 8426EPAD0

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 3.04 times more return on investment than 8426EPAD0. However, Patterson UTI is 3.04 times more volatile than US8426EPAD09. It trades about 0.07 of its potential returns per unit of risk. US8426EPAD09 is currently generating about -0.04 per unit of risk. If you would invest  774.00  in Patterson UTI Energy on December 26, 2024 and sell it today you would earn a total of  75.00  from holding Patterson UTI Energy or generate 9.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Patterson UTI Energy  vs.  US8426EPAD09

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

US8426EPAD09

Risk-Adjusted Performance

Insignificant

Over the last 90 days US8426EPAD09 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 8426EPAD0 is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Patterson UTI and 8426EPAD0

The main advantage of trading using opposite Patterson UTI and 8426EPAD0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson UTI position performs unexpectedly, 8426EPAD0 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 8426EPAD0 will offset losses from the drop in 8426EPAD0's long position.

The idea behind Patterson UTI Energy and US8426EPAD09 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.