Correlation Between Patterson UTI and Cannae Holdings

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

Diversification Opportunities for Patterson UTI and Cannae Holdings

0.27

Correlation Coefficient

Patterson UTI  Cannae Holdings

Modest diversification

The 3 months correlation between Patterson and Cannae is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Cannae Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannae Holdings 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 Cannae Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannae Holdings has no effect on the direction of Patterson UTI i.e., Patterson UTI and Cannae Holdings go up and down completely randomly.

Pair Corralation between Patterson UTI and Cannae Holdings

Given the investment horizon of 90 days Patterson UTI Energy is expected to generate 2.81 times more return on investment than Cannae Holdings. However, Patterson UTI is 2.81 times more volatile than Cannae Holdings. It trades about -0.09 of its potential returns per unit of risk. Cannae Holdings is currently generating about -0.39 per unit of risk. If you would invest  826.00  in Patterson UTI Energy on September 27, 2024 and sell it today you would lose (48.00) from holding Patterson UTI Energy or give up 5.81% 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.  Cannae Holdings

Patterson UTI Energy

Risk-Adjusted Performance

1 of 100

Weak

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. In spite of very healthy technical and fundamental indicators, Patterson UTI is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Cannae Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cannae Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cannae Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Patterson UTI and Cannae Holdings

The main advantage of trading using opposite Patterson UTI and Cannae Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patterson UTI position performs unexpectedly, Cannae Holdings 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 Cannae Holdings will offset losses from the drop in Cannae Holdings' long position.

The idea behind Patterson UTI Energy and Cannae Holdings 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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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.