Correlation Between PHX Energy and Calfrac Well

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

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

Diversification Opportunities for PHX Energy and Calfrac Well

0.25

Correlation Coefficient

PHX Energy  Calfrac Well

Modest diversification

The 3 months correlation between PHX and Calfrac is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PHX Energy Services 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 PHX Energy 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 PHX Energy Services 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 PHX Energy i.e., PHX Energy and Calfrac Well go up and down completely randomly.

Pair Corralation between PHX Energy and Calfrac Well

Assuming the 90 days trading horizon PHX Energy Services is expected to generate 0.9 times more return on investment than Calfrac Well. However, PHX Energy Services is 1.11 times less risky than Calfrac Well. It trades about 0.05 of its potential returns per unit of risk. Calfrac Well Services is currently generating about -0.03 per unit of risk. If you would invest  627.00  in PHX Energy Services on October 24, 2024 and sell it today you would earn a total of  318.00  from holding PHX Energy Services or generate 50.72% return on investment over 90 days.

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

PHX Energy Services  vs.  Calfrac Well Services

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PHX Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Calfrac Well Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Calfrac Well Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Calfrac Well is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PHX Energy and Calfrac Well

The main advantage of trading using opposite PHX Energy and Calfrac Well positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PHX Energy 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 PHX Energy Services 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.