Correlation Between Oil States and Cactus
Can any of the company-specific risk be diversified away by investing in both Oil States 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 Oil States and Cactus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil States International and Cactus Inc, you can compare the effects of market volatilities on Oil States 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 Oil States with a short position of Cactus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil States and Cactus.
Diversification Opportunities for Oil States and Cactus
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oil and Cactus is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc and Oil States 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 Oil States International 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 Oil States i.e., Oil States and Cactus go up and down completely randomly.
Pair Corralation between Oil States and Cactus
Considering the 90-day investment horizon Oil States International is expected to generate 1.23 times more return on investment than Cactus. However, Oil States is 1.23 times more volatile than Cactus Inc. It trades about 0.3 of its potential returns per unit of risk. Cactus Inc is currently generating about 0.28 per unit of risk. If you would invest 435.00 in Oil States International on August 27, 2024 and sell it today you would earn a total of 116.00 from holding Oil States International or generate 26.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil States International vs. Cactus Inc
Performance |
| Timeline |
| Oil States International |
| Cactus Inc |
Oil States and Cactus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil States and Cactus
The main advantage of trading using opposite Oil States and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil States 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.| Oil States vs. ProPetro Holding Corp | Oil States vs. RPC Inc | Oil States vs. MRC Global | Oil States vs. Expro Group Holdings |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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