Correlation Between ProPetro Holding and Cactus

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

Diversification Opportunities for ProPetro Holding and Cactus

0.47

Correlation Coefficient

ProPetro Holding  Cactus

Very weak diversification

The 3 months correlation between ProPetro and Cactus is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ProPetro Holding Corp and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc 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 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 ProPetro Holding i.e., ProPetro Holding and Cactus go up and down completely randomly.

Pair Corralation between ProPetro Holding and Cactus

Given the investment horizon of 90 days ProPetro Holding is expected to generate 2.11 times less return on investment than Cactus. In addition to that, ProPetro Holding is 1.27 times more volatile than Cactus Inc. It trades about 0.01 of its total potential returns per unit of risk. Cactus Inc is currently generating about 0.03 per unit of volatility. If you would invest  4,915  in Cactus Inc on September 19, 2024 and sell it today you would earn a total of  903.00  from holding Cactus Inc or generate 18.37% return on investment over 90 days.

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

ProPetro Holding Corp  vs.  Cactus Inc

ProPetro Holding Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProPetro Holding Corp are ranked lower than 3 (%) 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.

Cactus Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ProPetro Holding and Cactus

The main advantage of trading using opposite ProPetro Holding and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProPetro Holding 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 ProPetro Holding Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.