Correlation Between Calfrac Well and Secure Energy

Can any of the company-specific risk be diversified away by investing in both Calfrac Well and Secure 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 Secure 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 Secure Energy Services, you can compare the effects of market volatilities on Calfrac Well and Secure 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 Secure Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calfrac Well and Secure Energy.

Diversification Opportunities for Calfrac Well and Secure Energy

-0.11

Correlation Coefficient

Calfrac Well  Secure Energy

Good diversification

The 3 months correlation between Calfrac and Secure is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Calfrac Well Services and Secure Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secure Energy Services 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 Secure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secure Energy Services has no effect on the direction of Calfrac Well i.e., Calfrac Well and Secure Energy go up and down completely randomly.

Pair Corralation between Calfrac Well and Secure Energy

Assuming the 90 days trading horizon Calfrac Well is expected to generate 78.38 times less return on investment than Secure Energy. But when comparing it to its historical volatility, Calfrac Well Services is 1.46 times less risky than Secure Energy. It trades about 0.0 of its potential returns per unit of risk. Secure Energy Services is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,188  in Secure Energy Services on August 31, 2024 and sell it today you would earn a total of  403.00  from holding Secure Energy Services or generate 33.92% return on investment over 90 days.

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

Calfrac Well Services  vs.  Secure Energy Services

Calfrac Well Services

Risk-Adjusted Performance

0 of 100

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 latest stock price disarray, may contribute to short-term losses for the investors.

Secure Energy Services

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Secure Energy Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Secure Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Calfrac Well and Secure Energy

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

The idea behind Calfrac Well Services and Secure Energy Services 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.