Correlation Between Noble Plc and Patterson UTI

Can any of the company-specific risk be diversified away by investing in both Noble Plc 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 Noble Plc and Patterson UTI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Noble plc and Patterson UTI Energy, you can compare the effects of market volatilities on Noble Plc 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 Noble Plc with a short position of Patterson UTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noble Plc and Patterson UTI.

Diversification Opportunities for Noble Plc and Patterson UTI

0.54

Correlation Coefficient

Noble Plc  Patterson UTI

Very weak diversification

The 3 months correlation between Noble and Patterson is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Noble plc 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 Noble Plc 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 Noble plc 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 Noble Plc i.e., Noble Plc and Patterson UTI go up and down completely randomly.

Pair Corralation between Noble Plc and Patterson UTI

Allowing for the 90-day total investment horizon Noble plc is expected to generate 0.95 times more return on investment than Patterson UTI. However, Noble plc is 1.06 times less risky than Patterson UTI. It trades about -0.08 of its potential returns per unit of risk. Patterson UTI Energy is currently generating about -0.1 per unit of risk. If you would invest  4,777  in Noble plc on January 31, 2024 and sell it today you would lose (148.00) from holding Noble plc or give up 3.1% of portfolio value over 90 days.

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

Noble plc  vs.  Patterson UTI Energy

Noble plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Noble plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Noble Plc may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Patterson UTI Energy

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson UTI Energy are ranked lower than 2 (%) 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.

Pair Trading with Noble Plc and Patterson UTI

The main advantage of trading using opposite Noble Plc and Patterson UTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noble Plc 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 Noble plc 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..