Correlation Between Patterson UTI and NORTHERN OCEAN

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

Diversification Opportunities for Patterson UTI and NORTHERN OCEAN

0.16

Correlation Coefficient

Patterson UTI  NORTHERN OCEAN

Average diversification

The 3 months correlation between Patterson and NORTHERN is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Patterson UTI Energy and NORTHERN OCEAN LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHERN OCEAN LTD 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 NORTHERN OCEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHERN OCEAN LTD has no effect on the direction of Patterson UTI i.e., Patterson UTI and NORTHERN OCEAN go up and down completely randomly.

Pair Corralation between Patterson UTI and NORTHERN OCEAN

Assuming the 90 days horizon Patterson UTI is expected to generate 1.11 times less return on investment than NORTHERN OCEAN. In addition to that, Patterson UTI Energy is as risky as NORTHERN OCEAN. It trades about 0.03 of its total potential returns per unit of risk. NORTHERN OCEAN LTD is currently generating about 0.04 per unit of volatility. If you would invest  45.00  in NORTHERN OCEAN LTD on April 20, 2025 and sell it today you would earn a total of  2.00  from holding NORTHERN OCEAN LTD or generate 4.44% return on investment over 90 days.

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

Patterson UTI Energy  vs.  NORTHERN OCEAN LTD

Patterson UTI Energy

Risk-Adjusted Performance

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. Despite nearly fragile basic indicators, Patterson UTI may actually be approaching a critical reversion point that can send shares even higher in August 2025.

NORTHERN OCEAN LTD

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NORTHERN OCEAN LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NORTHERN OCEAN may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Patterson UTI and NORTHERN OCEAN

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

The idea behind Patterson UTI Energy and NORTHERN OCEAN LTD 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.