Correlation Between RPC and Smart Sand
Can any of the company-specific risk be diversified away by investing in both RPC and Smart Sand 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 RPC and Smart Sand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RPC Inc and Smart Sand, you can compare the effects of market volatilities on RPC and Smart Sand 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 RPC with a short position of Smart Sand. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPC and Smart Sand.
Diversification Opportunities for RPC and Smart Sand
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between RPC and Smart is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding RPC Inc and Smart Sand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Sand and RPC 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 RPC Inc are associated (or correlated) with Smart Sand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Sand has no effect on the direction of RPC i.e., RPC and Smart Sand go up and down completely randomly.
Pair Corralation between RPC and Smart Sand
Considering the 90-day investment horizon RPC is expected to generate 1.39 times less return on investment than Smart Sand. But when comparing it to its historical volatility, RPC Inc is 1.68 times less risky than Smart Sand. It trades about 0.18 of its potential returns per unit of risk. Smart Sand is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 215.00 in Smart Sand on August 28, 2024 and sell it today you would earn a total of 30.00 from holding Smart Sand or generate 13.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RPC Inc vs. Smart Sand
Performance |
| Timeline |
| RPC Inc |
| Smart Sand |
RPC and Smart Sand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RPC and Smart Sand
The main advantage of trading using opposite RPC and Smart Sand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPC position performs unexpectedly, Smart Sand 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 Smart Sand will offset losses from the drop in Smart Sand's long position.The idea behind RPC Inc and Smart Sand 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.| Smart Sand vs. ProPetro Holding Corp | Smart Sand vs. RPC Inc | Smart Sand vs. MRC Global | Smart Sand vs. Expro Group Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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