Correlation Between Treasury Wine and Patterson UTI

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Can any of the company-specific risk be diversified away by investing in both Treasury Wine 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 Treasury Wine and Patterson UTI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Treasury Wine Estates and Patterson UTI Energy, you can compare the effects of market volatilities on Treasury Wine 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 Treasury Wine with a short position of Patterson UTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treasury Wine and Patterson UTI.

Diversification Opportunities for Treasury Wine and Patterson UTI

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Treasury and Patterson is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates 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 Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and Patterson UTI go up and down completely randomly.

Pair Corralation between Treasury Wine and Patterson UTI

Assuming the 90 days horizon Treasury Wine Estates is expected to generate 0.71 times more return on investment than Patterson UTI. However, Treasury Wine Estates is 1.4 times less risky than Patterson UTI. It trades about 0.02 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about 0.0 per unit of risk. If you would invest  740.00  in Treasury Wine Estates on December 30, 2023 and sell it today you would earn a total of  42.00  from holding Treasury Wine Estates or generate 5.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy85.22%
ValuesDaily Returns

Treasury Wine Estates  vs.  Patterson-UTI Energy

 Performance 
       Timeline  
Treasury Wine Estates 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Wine Estates are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Treasury Wine may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Patterson-UTI Energy 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Patterson UTI displayed solid returns over the last few months and may actually be approaching a breakup point.

Treasury Wine and Patterson UTI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Treasury Wine and Patterson UTI

The main advantage of trading using opposite Treasury Wine and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates 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.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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