Correlation Between Natural Gas and ProFrac Holding

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

By analyzing existing cross correlation between Natural Gas Services and ProFrac Holding Corp, you can compare the effects of market volatilities on Natural Gas and ProFrac Holding 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 Natural Gas with a short position of ProFrac Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and ProFrac Holding.

Diversification Opportunities for Natural Gas and ProFrac Holding

0.46

Correlation Coefficient

Natural Gas  ProFrac Holding

Very weak diversification

The 3 months correlation between Natural and ProFrac is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas Services and ProFrac Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProFrac Holding Corp and Natural Gas 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 Natural Gas Services are associated (or correlated) with ProFrac Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProFrac Holding Corp has no effect on the direction of Natural Gas i.e., Natural Gas and ProFrac Holding go up and down completely randomly.

Pair Corralation between Natural Gas and ProFrac Holding

Considering the 90-day investment horizon Natural Gas Services is expected to under-perform the ProFrac Holding. But the stock apears to be less risky and, when comparing its historical volatility, Natural Gas Services is 1.46 times less risky than ProFrac Holding. The stock trades about -0.11 of its potential returns per unit of risk. The ProFrac Holding Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  786.00  in ProFrac Holding Corp on December 29, 2024 and sell it today you would lose (15.00) from holding ProFrac Holding Corp or give up 1.91% of portfolio value over 90 days.

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

Natural Gas Services  vs.  ProFrac Holding Corp

Natural Gas Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Gas Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ProFrac Holding Corp

Risk-Adjusted Performance

Weak

Over the last 90 days ProFrac Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ProFrac Holding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Natural Gas and ProFrac Holding

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

The idea behind Natural Gas Services and ProFrac Holding Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.