Correlation Between Ranger Energy and Cactus

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

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

Diversification Opportunities for Ranger Energy and Cactus

0.23

Correlation Coefficient

Ranger Energy  Cactus

Modest diversification

The 3 months correlation between Ranger and Cactus is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ranger Energy Services and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc and Ranger 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 Ranger Energy Services 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 Ranger Energy i.e., Ranger Energy and Cactus go up and down completely randomly.

Pair Corralation between Ranger Energy and Cactus

Given the investment horizon of 90 days Ranger Energy Services is expected to generate 1.35 times more return on investment than Cactus. However, Ranger Energy is 1.35 times more volatile than Cactus Inc. It trades about 0.05 of its potential returns per unit of risk. Cactus Inc is currently generating about -0.16 per unit of risk. If you would invest  1,650  in Ranger Energy Services on November 28, 2024 and sell it today you would earn a total of  74.00  from holding Ranger Energy Services or generate 4.48% return on investment over 90 days.

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

Ranger Energy Services  vs.  Cactus Inc

Ranger Energy Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ranger Energy Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Ranger Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Cactus Inc

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ranger Energy and Cactus

The main advantage of trading using opposite Ranger Energy and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ranger Energy 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 Ranger Energy Services 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.