Correlation Between Calfrac Well and CES Energy

Can any of the company-specific risk be diversified away by investing in both Calfrac Well and CES Energy 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 Calfrac Well and CES Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Calfrac Well Services and CES Energy Solutions, you can compare the effects of market volatilities on Calfrac Well and CES Energy 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 Calfrac Well with a short position of CES Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calfrac Well and CES Energy.

Diversification Opportunities for Calfrac Well and CES Energy

0.14

Correlation Coefficient

Calfrac Well  CES Energy

Average diversification

The 3 months correlation between Calfrac and CES is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Calfrac Well Services and CES Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CES Energy Solutions and Calfrac Well 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 Calfrac Well Services are associated (or correlated) with CES Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CES Energy Solutions has no effect on the direction of Calfrac Well i.e., Calfrac Well and CES Energy go up and down completely randomly.

Pair Corralation between Calfrac Well and CES Energy

Assuming the 90 days trading horizon Calfrac Well Services is expected to generate 0.8 times more return on investment than CES Energy. However, Calfrac Well Services is 1.25 times less risky than CES Energy. It trades about -0.02 of its potential returns per unit of risk. CES Energy Solutions is currently generating about -0.22 per unit of risk. If you would invest  385.00  in Calfrac Well Services on December 4, 2024 and sell it today you would lose (10.00) from holding Calfrac Well Services or give up 2.6% of portfolio value over 90 days.

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

Calfrac Well Services  vs.  CES Energy Solutions

Calfrac Well Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Calfrac Well Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Calfrac Well is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CES Energy Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days CES Energy Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Calfrac Well and CES Energy

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

The idea behind Calfrac Well Services and CES Energy Solutions 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.