Correlation Between Tesla and Patterson UTI
Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and Patterson UTI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Patterson UTI Energy, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of Patterson UTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Patterson UTI.
Diversification Opportunities for Tesla and Patterson UTI
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tesla and Patterson is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tesla 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 Tesla 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 Tesla 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 Tesla i.e., Tesla and Patterson UTI go up and down completely randomly.
Pair Corralation between Tesla and Patterson UTI
Given the investment horizon of 90 days Tesla Inc is expected to generate 1.53 times more return on investment than Patterson UTI. However, Tesla is 1.53 times more volatile than Patterson UTI Energy. It trades about 0.38 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.14 per unit of risk. If you would invest 24,284 in Tesla Inc on September 4, 2024 and sell it today you would earn a total of 10,858 from holding Tesla Inc or generate 44.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Patterson UTI Energy
Performance |
| Timeline |
| Tesla Inc |
| Patterson UTI Energy |
Tesla and Patterson UTI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Patterson UTI
The main advantage of trading using opposite Tesla and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla 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. Precision Drilling | Patterson UTI vs. Noble plc | 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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