Correlation Between Valaris and ProFrac Holding

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

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

Diversification Opportunities for Valaris and ProFrac Holding

-0.33

Correlation Coefficient

Valaris  ProFrac Holding

Very good diversification

The 3 months correlation between Valaris and ProFrac is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Valaris 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 Valaris 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 Valaris 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 Valaris i.e., Valaris and ProFrac Holding go up and down completely randomly.

Pair Corralation between Valaris and ProFrac Holding

Considering the 90-day investment horizon Valaris is expected to generate 0.63 times more return on investment than ProFrac Holding. However, Valaris is 1.58 times less risky than ProFrac Holding. It trades about -0.2 of its potential returns per unit of risk. ProFrac Holding Corp is currently generating about -0.14 per unit of risk. If you would invest  4,600  in Valaris on September 27, 2024 and sell it today you would lose (498.00) from holding Valaris or give up 10.83% of portfolio value over 90 days.

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

Valaris  vs.  ProFrac Holding Corp

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.

ProFrac Holding Corp

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProFrac Holding Corp are ranked lower than 4 (%) 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 Valaris and ProFrac Holding

The main advantage of trading using opposite Valaris and ProFrac Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valaris 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 Valaris 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.