Correlation Between Valaris and ProPetro Holding

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

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

Diversification Opportunities for Valaris and ProPetro Holding

-0.37

Correlation Coefficient

Valaris  ProPetro Holding

Very good diversification

The 3 months correlation between Valaris and ProPetro is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Valaris and ProPetro Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProPetro 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 ProPetro Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProPetro Holding Corp has no effect on the direction of Valaris i.e., Valaris and ProPetro Holding go up and down completely randomly.

Pair Corralation between Valaris and ProPetro Holding

Considering the 90-day investment horizon Valaris is expected to under-perform the ProPetro Holding. But the stock apears to be less risky and, when comparing its historical volatility, Valaris is 1.77 times less risky than ProPetro Holding. The stock trades about -0.26 of its potential returns per unit of risk. The ProPetro Holding Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  845.00  in ProPetro Holding Corp on September 24, 2024 and sell it today you would earn a total of  45.00  from holding ProPetro Holding Corp or generate 5.33% return on investment over 90 days.

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

Valaris  vs.  ProPetro 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.

ProPetro Holding Corp

Risk-Adjusted Performance

3 of 100

Insignificant

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 inconsistent primary indicators, ProPetro Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valaris and ProPetro Holding

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

The idea behind Valaris and ProPetro 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.