Correlation Between Select Energy and Cactus
Can any of the company-specific risk be diversified away by investing in both Select Energy 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 Select Energy and Cactus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Energy Services and Cactus Inc, you can compare the effects of market volatilities on Select Energy 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 Select Energy with a short position of Cactus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Energy and Cactus.
Diversification Opportunities for Select Energy and Cactus
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Select and Cactus is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Select Energy Services and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc and Select Energy 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 Select Energy Services 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 Select Energy i.e., Select Energy and Cactus go up and down completely randomly.
Pair Corralation between Select Energy and Cactus
Given the investment horizon of 90 days Select Energy Services is expected to generate 1.83 times more return on investment than Cactus. However, Select Energy is 1.83 times more volatile than Cactus Inc. It trades about 0.28 of its potential returns per unit of risk. Cactus Inc is currently generating about 0.25 per unit of risk. If you would invest 1,066 in Select Energy Services on August 25, 2024 and sell it today you would earn a total of 403.00 from holding Select Energy Services or generate 37.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Energy Services vs. Cactus Inc
Performance |
| Timeline |
| Select Energy Services |
| Cactus Inc |
Select Energy and Cactus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Energy and Cactus
The main advantage of trading using opposite Select Energy and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Energy 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.| Select Energy vs. Orion Engineered Carbons | Select Energy vs. Element Solutions | Select Energy vs. Kronos Worldwide | Select Energy vs. FutureFuel Corp |
| 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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