Correlation Between ProFrac Holding and Cactus
Can any of the company-specific risk be diversified away by investing in both ProFrac Holding and Cactus 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 ProFrac Holding and Cactus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProFrac Holding Corp and Cactus Inc, you can compare the effects of market volatilities on ProFrac Holding and Cactus 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 ProFrac Holding with a short position of Cactus. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProFrac Holding and Cactus.
Diversification Opportunities for ProFrac Holding and Cactus
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProFrac and Cactus is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ProFrac Holding Corp and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc and ProFrac Holding 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 ProFrac Holding Corp are associated (or correlated) with Cactus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cactus Inc has no effect on the direction of ProFrac Holding i.e., ProFrac Holding and Cactus go up and down completely randomly.
Pair Corralation between ProFrac Holding and Cactus
Given the investment horizon of 90 days ProFrac Holding Corp is expected to under-perform the Cactus. In addition to that, ProFrac Holding is 1.65 times more volatile than Cactus Inc. It trades about -0.03 of its total potential returns per unit of risk. Cactus Inc is currently generating about 0.04 per unit of volatility. If you would invest 5,146 in Cactus Inc on August 24, 2024 and sell it today you would earn a total of 1,750 from holding Cactus Inc or generate 34.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProFrac Holding Corp vs. Cactus Inc
Performance |
| Timeline |
| ProFrac Holding Corp |
| Cactus Inc |
ProFrac Holding and Cactus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProFrac Holding and Cactus
The main advantage of trading using opposite ProFrac Holding and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProFrac Holding position performs unexpectedly, Cactus 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 Cactus will offset losses from the drop in Cactus' long position.| ProFrac Holding vs. Newpark Resources | ProFrac Holding vs. Natural Gas Services | ProFrac Holding vs. Geospace Technologies | ProFrac Holding vs. MRC Global |
| Cactus vs. ChampionX | Cactus vs. Expro Group Holdings | Cactus vs. Ranger Energy Services | Cactus vs. MRC Global |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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