Correlation Between Now and Calfrac Well

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

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

Diversification Opportunities for Now and Calfrac Well

-0.16

Correlation Coefficient

Now  Calfrac Well

Good diversification

The 3 months correlation between Now and Calfrac is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Calfrac Well Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calfrac Well Services and Now 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 Now Inc are associated (or correlated) with Calfrac Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calfrac Well Services has no effect on the direction of Now i.e., Now and Calfrac Well go up and down completely randomly.

Pair Corralation between Now and Calfrac Well

Given the investment horizon of 90 days Now Inc is expected to under-perform the Calfrac Well. But the stock apears to be less risky and, when comparing its historical volatility, Now Inc is 1.54 times less risky than Calfrac Well. The stock trades about -0.53 of its potential returns per unit of risk. The Calfrac Well Services is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  289.00  in Calfrac Well Services on September 23, 2024 and sell it today you would lose (15.00) from holding Calfrac Well Services or give up 5.19% of portfolio value over 90 days.

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

Now Inc  vs.  Calfrac Well Services

Now Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Now Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Now is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 nearly stable technical and fundamental indicators, Calfrac Well is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Now and Calfrac Well

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

The idea behind Now Inc and Calfrac Well 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.