Correlation Between Patterson UTI and TFI International

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

Diversification Opportunities for Patterson UTI and TFI International

0.25

Correlation Coefficient

Patterson UTI  TFI International

Modest diversification

The 3 months correlation between Patterson and TFI is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International 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 TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of Patterson UTI i.e., Patterson UTI and TFI International go up and down completely randomly.

Pair Corralation between Patterson UTI and TFI International

Given the investment horizon of 90 days Patterson UTI Energy is expected to under-perform the TFI International. In addition to that, Patterson UTI is 1.77 times more volatile than TFI International. It trades about -0.12 of its total potential returns per unit of risk. TFI International is currently generating about -0.17 per unit of volatility. If you would invest  14,923  in TFI International on September 27, 2024 and sell it today you would lose (788.00) from holding TFI International or give up 5.28% 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.  TFI International

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.

TFI International

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Patterson UTI and TFI International

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

The idea behind Patterson UTI Energy and TFI International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..