Correlation Between Patterson-UTI Energy and Ford

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Can any of the company-specific risk be diversified away by investing in both Patterson-UTI Energy and Ford 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 Energy and Ford 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 Ford Motor, you can compare the effects of market volatilities on Patterson-UTI Energy and Ford 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 Energy with a short position of Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patterson-UTI Energy and Ford.

Diversification Opportunities for Patterson-UTI Energy and Ford

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Patterson-UTI and Ford is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Patterson-UTI Energy and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Patterson-UTI Energy 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Patterson-UTI Energy i.e., Patterson-UTI Energy and Ford go up and down completely randomly.

Pair Corralation between Patterson-UTI Energy and Ford

Given the investment horizon of 90 days Patterson-UTI Energy is expected to generate 1.44 times more return on investment than Ford. However, Patterson-UTI Energy is 1.44 times more volatile than Ford Motor. It trades about 0.07 of its potential returns per unit of risk. Ford Motor is currently generating about 0.02 per unit of risk. If you would invest  610.00  in Patterson-UTI Energy on October 28, 2022 and sell it today you would earn a total of  1,117  from holding Patterson-UTI Energy or generate 183.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Patterson-UTI Energy  vs.  Ford Motor

 Performance (%) 
       Timeline  
Patterson-UTI Energy 
Patterson-UTI Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Patterson-UTI Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Patterson-UTI Energy is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Patterson-UTI Price Channel

Ford Motor 
Ford Performance
0 of 100
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Ford is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ford Price Channel

Patterson-UTI Energy and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Patterson-UTI Energy and Ford

The main advantage of trading using opposite Patterson-UTI Energy and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson-UTI Energy position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.
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The idea behind Patterson-UTI Energy and Ford Motor 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.
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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