Correlation Between ProPetro Holding and Valaris

Can any of the company-specific risk be diversified away by investing in both ProPetro Holding and Valaris 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 Valaris 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 Valaris, you can compare the effects of market volatilities on ProPetro Holding and Valaris 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 Valaris. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProPetro Holding and Valaris.

Diversification Opportunities for ProPetro Holding and Valaris

-0.41

Correlation Coefficient

ProPetro Holding  Valaris

Very good diversification

The 3 months correlation between ProPetro and Valaris is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding ProPetro Holding Corp and Valaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valaris 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 Valaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valaris has no effect on the direction of ProPetro Holding i.e., ProPetro Holding and Valaris go up and down completely randomly.

Pair Corralation between ProPetro Holding and Valaris

Given the investment horizon of 90 days ProPetro Holding Corp is expected to generate 1.74 times more return on investment than Valaris. However, ProPetro Holding is 1.74 times more volatile than Valaris. It trades about 0.1 of its potential returns per unit of risk. Valaris is currently generating about -0.17 per unit of risk. If you would invest  775.00  in ProPetro Holding Corp on September 25, 2024 and sell it today you would earn a total of  126.00  from holding ProPetro Holding Corp or generate 16.26% return on investment over 90 days.

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

ProPetro Holding Corp  vs.  Valaris

ProPetro Holding Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProPetro Holding Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting primary indicators, ProPetro Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Valaris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valaris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with ProPetro Holding and Valaris

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

The idea behind ProPetro Holding Corp and Valaris 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.