Correlation Between ProFrac Holding and NCS Multistage

Can any of the company-specific risk be diversified away by investing in both ProFrac Holding and NCS Multistage 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 ProFrac Holding and NCS Multistage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProFrac Holding Corp and NCS Multistage Holdings, you can compare the effects of market volatilities on ProFrac Holding and NCS Multistage 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 ProFrac Holding with a short position of NCS Multistage. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProFrac Holding and NCS Multistage.

Diversification Opportunities for ProFrac Holding and NCS Multistage

0.57

Correlation Coefficient

ProFrac Holding  NCS Multistage

Very weak diversification

The 3 months correlation between ProFrac and NCS is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ProFrac Holding Corp and NCS Multistage Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCS Multistage Holdings and ProFrac Holding 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 ProFrac Holding Corp are associated (or correlated) with NCS Multistage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCS Multistage Holdings has no effect on the direction of ProFrac Holding i.e., ProFrac Holding and NCS Multistage go up and down completely randomly.

Pair Corralation between ProFrac Holding and NCS Multistage

Given the investment horizon of 90 days ProFrac Holding is expected to generate 3.0 times less return on investment than NCS Multistage. In addition to that, ProFrac Holding is 1.52 times more volatile than NCS Multistage Holdings. It trades about 0.02 of its total potential returns per unit of risk. NCS Multistage Holdings is currently generating about 0.11 per unit of volatility. If you would invest  1,697  in NCS Multistage Holdings on September 30, 2024 and sell it today you would earn a total of  775.00  from holding NCS Multistage Holdings or generate 45.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ProFrac Holding Corp  vs.  NCS Multistage Holdings

ProFrac Holding Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProFrac Holding Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ProFrac Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

NCS Multistage Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NCS Multistage Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, NCS Multistage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProFrac Holding and NCS Multistage

The main advantage of trading using opposite ProFrac Holding and NCS Multistage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProFrac Holding position performs unexpectedly, NCS Multistage 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 NCS Multistage will offset losses from the drop in NCS Multistage's long position.

The idea behind ProFrac Holding Corp and NCS Multistage Holdings 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.