Correlation Between Patterson UTI and PACCAR
Can any of the company-specific risk be diversified away by investing in both Patterson UTI and PACCAR 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 PACCAR 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 PACCAR Inc, you can compare the effects of market volatilities on Patterson UTI and PACCAR 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 PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson UTI and PACCAR.
Diversification Opportunities for Patterson UTI and PACCAR
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Patterson and PACCAR is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Patterson UTI i.e., Patterson UTI and PACCAR go up and down completely randomly.
Pair Corralation between Patterson UTI and PACCAR
Given the investment horizon of 90 days Patterson UTI Energy is expected to under-perform the PACCAR. In addition to that, Patterson UTI is 2.07 times more volatile than PACCAR Inc. It trades about -0.15 of its total potential returns per unit of risk. PACCAR Inc is currently generating about -0.02 per unit of volatility. If you would invest 11,613 in PACCAR Inc on September 12, 2024 and sell it today you would lose (76.00) from holding PACCAR Inc or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Patterson UTI Energy vs. PACCAR Inc
Performance |
| Timeline |
| Patterson UTI Energy |
| PACCAR Inc |
Patterson UTI and PACCAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Patterson UTI and PACCAR
The main advantage of trading using opposite Patterson UTI and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson UTI position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR's long position.| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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