Correlation Between Petrofac and ProFrac Holding
Can any of the company-specific risk be diversified away by investing in both Petrofac and ProFrac Holding 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 Petrofac and ProFrac Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrofac Ltd ADR and ProFrac Holding Corp, you can compare the effects of market volatilities on Petrofac and ProFrac Holding 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 Petrofac with a short position of ProFrac Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrofac and ProFrac Holding.
Diversification Opportunities for Petrofac and ProFrac Holding
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Petrofac and ProFrac is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Petrofac Ltd ADR and ProFrac Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProFrac Holding Corp and Petrofac 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 Petrofac Ltd ADR are associated (or correlated) with ProFrac Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProFrac Holding Corp has no effect on the direction of Petrofac i.e., Petrofac and ProFrac Holding go up and down completely randomly.
Pair Corralation between Petrofac and ProFrac Holding
Assuming the 90 days horizon Petrofac Ltd ADR is expected to under-perform the ProFrac Holding. In addition to that, Petrofac is 2.21 times more volatile than ProFrac Holding Corp. It trades about -0.03 of its total potential returns per unit of risk. ProFrac Holding Corp is currently generating about 0.05 per unit of volatility. If you would invest 657.00 in ProFrac Holding Corp on November 2, 2024 and sell it today you would earn a total of 103.00 from holding ProFrac Holding Corp or generate 15.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrofac Ltd ADR vs. ProFrac Holding Corp
Performance |
| Timeline |
| Petrofac ADR |
| ProFrac Holding Corp |
Petrofac and ProFrac Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrofac and ProFrac Holding
The main advantage of trading using opposite Petrofac and ProFrac Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrofac position performs unexpectedly, ProFrac Holding 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 ProFrac Holding will offset losses from the drop in ProFrac Holding's long position.The idea behind Petrofac Ltd ADR and ProFrac Holding Corp 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.| ProFrac Holding vs. Natural Gas Services | ProFrac Holding vs. Geospace Technologies | ProFrac Holding vs. MRC Global | ProFrac Holding vs. Liberty Oilfield Services |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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