Correlation Between Calfrac Well and Petrofac

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

Diversification Opportunities for Calfrac Well and Petrofac

0.54

Correlation Coefficient

Calfrac Well  Petrofac

Very weak diversification

The 3 months correlation between Calfrac and Petrofac is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Calfrac Well Services and Petrofac Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrofac ADR 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 Petrofac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrofac ADR has no effect on the direction of Calfrac Well i.e., Calfrac Well and Petrofac go up and down completely randomly.

Pair Corralation between Calfrac Well and Petrofac

Assuming the 90 days horizon Calfrac Well Services is expected to under-perform the Petrofac. But the pink sheet apears to be less risky and, when comparing its historical volatility, Calfrac Well Services is 4.02 times less risky than Petrofac. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Petrofac Ltd ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Petrofac Ltd ADR on September 29, 2024 and sell it today you would lose (1.97) from holding Petrofac Ltd ADR or give up 24.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Calfrac Well Services  vs.  Petrofac Ltd ADR

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. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Petrofac ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrofac Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Calfrac Well and Petrofac

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

The idea behind Calfrac Well Services and Petrofac Ltd ADR 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 CEOs Directory module to screen CEOs from public companies around the world.