Correlation Between ProFrac Holding and Cactus

Can any of the company-specific risk be diversified away by investing in both ProFrac Holding 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 ProFrac Holding and Cactus 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 Cactus Inc, you can compare the effects of market volatilities on ProFrac Holding 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 ProFrac Holding with a short position of Cactus. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProFrac Holding and Cactus.

Diversification Opportunities for ProFrac Holding and Cactus

0.6

Correlation Coefficient

ProFrac Holding  Cactus

Poor diversification

The 3 months correlation between ProFrac and Cactus is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ProFrac Holding Corp and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc 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 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 ProFrac Holding i.e., ProFrac Holding and Cactus go up and down completely randomly.

Pair Corralation between ProFrac Holding and Cactus

Given the investment horizon of 90 days ProFrac Holding Corp is expected to generate 1.88 times more return on investment than Cactus. However, ProFrac Holding is 1.88 times more volatile than Cactus Inc. It trades about 0.05 of its potential returns per unit of risk. Cactus Inc is currently generating about -0.14 per unit of risk. If you would invest  744.00  in ProFrac Holding Corp on December 25, 2024 and sell it today you would earn a total of  57.00  from holding ProFrac Holding Corp or generate 7.66% return on investment over 90 days.

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

ProFrac Holding Corp  vs.  Cactus Inc

ProFrac Holding Corp

Risk-Adjusted Performance

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.

Cactus Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cactus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ProFrac Holding and Cactus

The main advantage of trading using opposite ProFrac Holding and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProFrac Holding 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.

The idea behind ProFrac Holding Corp and Cactus Inc 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.