Correlation Between Solaris Oilfield and ProFrac Holding

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

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

Diversification Opportunities for Solaris Oilfield and ProFrac Holding

0.07

Correlation Coefficient

Solaris Oilfield  ProFrac Holding

Significant diversification

The 3 months correlation between Solaris and ProFrac is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Solaris Oilfield Infrastructur and ProFrac Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProFrac Holding Corp and Solaris Oilfield 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 Solaris Oilfield Infrastructure are associated (or correlated) with ProFrac Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProFrac Holding Corp has no effect on the direction of Solaris Oilfield i.e., Solaris Oilfield and ProFrac Holding go up and down completely randomly.

Pair Corralation between Solaris Oilfield and ProFrac Holding

If you would invest  581.00  in ProFrac Holding Corp on September 19, 2024 and sell it today you would earn a total of  176.00  from holding ProFrac Holding Corp or generate 30.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	2.38%
Values	Daily Returns

Solaris Oilfield Infrastructur  vs.  ProFrac Holding Corp

Solaris Oilfield Inf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solaris Oilfield Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Solaris Oilfield is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

ProFrac Holding Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProFrac Holding Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ProFrac Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solaris Oilfield and ProFrac Holding

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

The idea behind Solaris Oilfield Infrastructure and ProFrac Holding Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.