Correlation Between PACCAR and Patterson UTI
Can any of the company-specific risk be diversified away by investing in both PACCAR 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 PACCAR and Patterson UTI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PACCAR Inc and Patterson UTI Energy, you can compare the effects of market volatilities on PACCAR 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 PACCAR with a short position of Patterson UTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of PACCAR and Patterson UTI.
Diversification Opportunities for PACCAR and Patterson UTI
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PACCAR and Patterson is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc 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 PACCAR 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 PACCAR Inc 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 PACCAR i.e., PACCAR and Patterson UTI go up and down completely randomly.
Pair Corralation between PACCAR and Patterson UTI
Given the investment horizon of 90 days PACCAR Inc is expected to generate 0.67 times more return on investment than Patterson UTI. However, PACCAR Inc is 1.49 times less risky than Patterson UTI. It trades about 0.05 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about -0.05 per unit of risk. If you would invest 10,611 in PACCAR Inc on September 12, 2024 and sell it today you would earn a total of 926.00 from holding PACCAR Inc or generate 8.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
PACCAR Inc vs. Patterson UTI Energy
Performance |
| Timeline |
| PACCAR Inc |
| Patterson UTI Energy |
PACCAR and Patterson UTI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PACCAR and Patterson UTI
The main advantage of trading using opposite PACCAR and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PACCAR 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 PACCAR Inc 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.| Patterson UTI vs. Nabors Industries | Patterson UTI vs. Borr Drilling | Patterson UTI vs. Transocean | Patterson UTI vs. Helmerich and Payne |
Check out your portfolio center.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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