Correlation Between Tetra Technologies and Cactus
Can any of the company-specific risk be diversified away by investing in both Tetra Technologies 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 Tetra Technologies and Cactus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tetra Technologies and Cactus Inc, you can compare the effects of market volatilities on Tetra Technologies 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 Tetra Technologies with a short position of Cactus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tetra Technologies and Cactus.
Diversification Opportunities for Tetra Technologies and Cactus
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tetra and Cactus is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tetra Technologies and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc and Tetra Technologies 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 Tetra Technologies 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 Tetra Technologies i.e., Tetra Technologies and Cactus go up and down completely randomly.
Pair Corralation between Tetra Technologies and Cactus
Considering the 90-day investment horizon Tetra Technologies is expected to generate 1.88 times more return on investment than Cactus. However, Tetra Technologies is 1.88 times more volatile than Cactus Inc. It trades about 0.26 of its potential returns per unit of risk. Cactus Inc is currently generating about 0.23 per unit of risk. If you would invest 296.00 in Tetra Technologies on August 24, 2024 and sell it today you would earn a total of 108.00 from holding Tetra Technologies or generate 36.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tetra Technologies vs. Cactus Inc
Performance |
| Timeline |
| Tetra Technologies |
| Cactus Inc |
Tetra Technologies and Cactus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tetra Technologies and Cactus
The main advantage of trading using opposite Tetra Technologies and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetra Technologies 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.| Tetra Technologies vs. MRC Global | Tetra Technologies vs. Oil States International | Tetra Technologies vs. Ranger Energy Services | Tetra Technologies vs. Oceaneering International |
| 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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