Correlation Between Patterson UTI and Nabors Industries
Can any of the company-specific risk be diversified away by investing in both Patterson UTI and Nabors Industries 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 Nabors Industries 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 Nabors Industries, you can compare the effects of market volatilities on Patterson UTI and Nabors Industries 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 Nabors Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson UTI and Nabors Industries.
Diversification Opportunities for Patterson UTI and Nabors Industries
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Patterson and Nabors is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Patterson UTI i.e., Patterson UTI and Nabors Industries go up and down completely randomly.
Pair Corralation between Patterson UTI and Nabors Industries
Given the investment horizon of 90 days Patterson UTI Energy is expected to under-perform the Nabors Industries. But the stock apears to be less risky and, when comparing its historical volatility, Patterson UTI Energy is 1.22 times less risky than Nabors Industries. The stock trades about -0.03 of its potential returns per unit of risk. The Nabors Industries is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 14,308 in Nabors Industries on August 27, 2024 and sell it today you would lose (6,578) from holding Nabors Industries or give up 45.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Patterson UTI Energy vs. Nabors Industries
Performance |
| Timeline |
| Patterson UTI Energy |
| Nabors Industries |
Patterson UTI and Nabors Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Patterson UTI and Nabors Industries
The main advantage of trading using opposite Patterson UTI and Nabors Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson UTI position performs unexpectedly, Nabors Industries 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 Nabors Industries will offset losses from the drop in Nabors Industries' long position.| Patterson UTI vs. Nabors Industries | Patterson UTI vs. Precision Drilling | Patterson UTI vs. Noble plc | Patterson UTI vs. Helmerich and Payne |
| Nabors Industries vs. Helmerich and Payne | Nabors Industries vs. Precision Drilling | Nabors Industries vs. Seadrill Limited | Nabors Industries vs. Borr Drilling |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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