Correlation Between Patterson UTI and Legal General
Can any of the company-specific risk be diversified away by investing in both Patterson UTI and Legal General 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 Legal General 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 Legal General Group, you can compare the effects of market volatilities on Patterson UTI and Legal General 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 Legal General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson UTI and Legal General.
Diversification Opportunities for Patterson UTI and Legal General
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Patterson and Legal is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Legal General Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legal General Group 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 Legal General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legal General Group has no effect on the direction of Patterson UTI i.e., Patterson UTI and Legal General go up and down completely randomly.
Pair Corralation between Patterson UTI and Legal General
Given the investment horizon of 90 days Patterson UTI Energy is expected to under-perform the Legal General. In addition to that, Patterson UTI is 1.57 times more volatile than Legal General Group. It trades about -0.15 of its total potential returns per unit of risk. Legal General Group is currently generating about 0.12 per unit of volatility. If you would invest 1,432 in Legal General Group on September 12, 2024 and sell it today you would earn a total of 57.00 from holding Legal General Group or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Patterson UTI Energy vs. Legal General Group
Performance |
| Timeline |
| Patterson UTI Energy |
| Legal General Group |
Patterson UTI and Legal General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Patterson UTI and Legal General
The main advantage of trading using opposite Patterson UTI and Legal General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson UTI position performs unexpectedly, Legal General 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 Legal General will offset losses from the drop in Legal General's long position.| Patterson UTI vs. Nabors Industries | Patterson UTI vs. Borr Drilling | Patterson UTI vs. Transocean | Patterson UTI vs. Helmerich and Payne |
| Legal General vs. Nuveen Global High | Legal General vs. New America High | Legal General vs. Brookfield Business Corp | Legal General vs. Elysee Development Corp |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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