Correlation Between Valaris and Cactus
Can any of the company-specific risk be diversified away by investing in both Valaris 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 Valaris and Cactus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valaris and Cactus Inc, you can compare the effects of market volatilities on Valaris 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 Valaris with a short position of Cactus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valaris and Cactus.
Diversification Opportunities for Valaris and Cactus
Very good diversification
The 3 months correlation between Valaris and Cactus is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Valaris and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc and Valaris 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 Valaris 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 Valaris i.e., Valaris and Cactus go up and down completely randomly.
Pair Corralation between Valaris and Cactus
Considering the 90-day investment horizon Valaris is expected to under-perform the Cactus. But the stock apears to be less risky and, when comparing its historical volatility, Valaris is 1.11 times less risky than Cactus. The stock trades about -0.05 of its potential returns per unit of risk. The Cactus Inc is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 5,759 in Cactus Inc on August 27, 2024 and sell it today you would earn a total of 1,140 from holding Cactus Inc or generate 19.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valaris vs. Cactus Inc
Performance |
| Timeline |
| Valaris |
| Cactus Inc |
Valaris and Cactus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valaris and Cactus
The main advantage of trading using opposite Valaris and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valaris 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.| Valaris vs. Weatherford International PLC | Valaris vs. TechnipFMC PLC | Valaris vs. Geospace Technologies | Valaris vs. Cactus Inc |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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