Correlation Between Enservco and Cactus

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

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

Diversification Opportunities for Enservco and Cactus

-0.42

Correlation Coefficient

Enservco  Cactus

Very good diversification

The 3 months correlation between Enservco and Cactus is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Enservco Co and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc and Enservco 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 Enservco Co 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 Enservco i.e., Enservco and Cactus go up and down completely randomly.

Pair Corralation between Enservco and Cactus

Given the investment horizon of 90 days Enservco Co is expected to under-perform the Cactus. In addition to that, Enservco is 3.86 times more volatile than Cactus Inc. It trades about -0.1 of its total potential returns per unit of risk. Cactus Inc is currently generating about 0.11 per unit of volatility. If you would invest  5,662  in Cactus Inc on September 4, 2024 and sell it today you would earn a total of  1,045  from holding Cactus Inc or generate 18.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	73.44%
Values	Daily Returns

Enservco Co  vs.  Cactus Inc

Enservco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enservco Co 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 basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Cactus Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cactus Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Cactus exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enservco and Cactus

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

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.