Correlation Between ProPetro Holding and SBM Offshore

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

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

Diversification Opportunities for ProPetro Holding and SBM Offshore

-0.39

Correlation Coefficient

ProPetro Holding  SBM Offshore

Very good diversification

The 3 months correlation between ProPetro and SBM is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding ProPetro Holding Corp and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV and ProPetro Holding 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 ProPetro Holding Corp are associated (or correlated) with SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of ProPetro Holding i.e., ProPetro Holding and SBM Offshore go up and down completely randomly.

Pair Corralation between ProPetro Holding and SBM Offshore

Given the investment horizon of 90 days ProPetro Holding Corp is expected to generate 2.49 times more return on investment than SBM Offshore. However, ProPetro Holding is 2.49 times more volatile than SBM Offshore NV. It trades about 0.27 of its potential returns per unit of risk. SBM Offshore NV is currently generating about -0.02 per unit of risk. If you would invest  788.00  in ProPetro Holding Corp on October 8, 2024 and sell it today you would earn a total of  199.00  from holding ProPetro Holding Corp or generate 25.25% return on investment over 90 days.

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

ProPetro Holding Corp  vs.  SBM Offshore NV

ProPetro Holding Corp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProPetro Holding Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, ProPetro Holding reported solid returns over the last few months and may actually be approaching a breakup point.

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProPetro Holding and SBM Offshore

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

The idea behind ProPetro Holding Corp and SBM Offshore NV 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.