Correlation Between Patterson UTI and American Axle
Can any of the company-specific risk be diversified away by investing in both Patterson UTI and American Axle 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 American Axle 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 American Axle Manufacturing, you can compare the effects of market volatilities on Patterson UTI and American Axle 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 American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson UTI and American Axle.
Diversification Opportunities for Patterson UTI and American Axle
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Patterson and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and American Axle Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Axle Manufa 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 American Axle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Axle Manufa has no effect on the direction of Patterson UTI i.e., Patterson UTI and American Axle go up and down completely randomly.
Pair Corralation between Patterson UTI and American Axle
Given the investment horizon of 90 days Patterson UTI Energy is expected to under-perform the American Axle. In addition to that, Patterson UTI is 1.04 times more volatile than American Axle Manufacturing. It trades about -0.06 of its total potential returns per unit of risk. American Axle Manufacturing is currently generating about -0.03 per unit of volatility. If you would invest 764.00 in American Axle Manufacturing on August 29, 2024 and sell it today you would lose (94.00) from holding American Axle Manufacturing or give up 12.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Patterson UTI Energy vs. American Axle Manufacturing
Performance |
| Timeline |
| Patterson UTI Energy |
| American Axle Manufa |
Patterson UTI and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Patterson UTI and American Axle
The main advantage of trading using opposite Patterson UTI and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson UTI position performs unexpectedly, American Axle 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 American Axle will offset losses from the drop in American Axle's long position.| Patterson UTI vs. Nabors Industries | Patterson UTI vs. Precision Drilling | Patterson UTI vs. Noble plc | Patterson UTI vs. Helmerich and Payne |
| American Axle vs. Lear Corporation | American Axle vs. Commercial Vehicle Group | American Axle vs. Adient PLC | American Axle vs. Gentex |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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