Correlation Between Patterson UTI and Mind Medicine

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

Diversification Opportunities for Patterson UTI and Mind Medicine

0.33

Correlation Coefficient

Patterson UTI  Mind Medicine

Weak diversification

The 3 months correlation between Patterson and Mind is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and Mind Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mind Medicine 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 Mind Medicine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mind Medicine has no effect on the direction of Patterson UTI i.e., Patterson UTI and Mind Medicine go up and down completely randomly.

Pair Corralation between Patterson UTI and Mind Medicine

Given the investment horizon of 90 days Patterson UTI Energy is expected to under-perform the Mind Medicine. But the stock apears to be less risky and, when comparing its historical volatility, Patterson UTI Energy is 1.68 times less risky than Mind Medicine. The stock trades about -0.01 of its potential returns per unit of risk. The Mind Medicine is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  636.00  in Mind Medicine on September 16, 2024 and sell it today you would earn a total of  80.00  from holding Mind Medicine or generate 12.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Patterson UTI Energy  vs.  Mind Medicine

Patterson UTI Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patterson UTI Energy has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Mind Medicine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mind Medicine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, Mind Medicine exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Patterson UTI and Mind Medicine

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

The idea behind Patterson UTI Energy and Mind Medicine 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.