Correlation Between Rivian Automotive and Patterson UTI

Can any of the company-specific risk be diversified away by investing in both Rivian Automotive and Patterson UTI 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 Rivian Automotive and Patterson UTI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rivian Automotive and Patterson UTI Energy, you can compare the effects of market volatilities on Rivian Automotive and Patterson UTI 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 Rivian Automotive with a short position of Patterson UTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rivian Automotive and Patterson UTI.

Diversification Opportunities for Rivian Automotive and Patterson UTI

0.32

Correlation Coefficient

Rivian Automotive  Patterson UTI

Weak diversification

The 3 months correlation between Rivian and Patterson is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Rivian Automotive and Patterson UTI Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson UTI Energy and Rivian Automotive 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 Rivian Automotive are associated (or correlated) with Patterson UTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson UTI Energy has no effect on the direction of Rivian Automotive i.e., Rivian Automotive and Patterson UTI go up and down completely randomly.

Pair Corralation between Rivian Automotive and Patterson UTI

Given the investment horizon of 90 days Rivian Automotive is expected to under-perform the Patterson UTI. In addition to that, Rivian Automotive is 1.55 times more volatile than Patterson UTI Energy. It trades about -0.04 of its total potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.08 per unit of volatility. If you would invest  745.00  in Patterson UTI Energy on December 23, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Rivian Automotive  vs.  Patterson UTI Energy

Rivian Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rivian Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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.

Pair Trading with Rivian Automotive and Patterson UTI

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

The idea behind Rivian Automotive and Patterson UTI Energy 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.