Correlation Between Cactus and ProFrac Holding

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

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

Diversification Opportunities for Cactus and ProFrac Holding

0.6

Correlation Coefficient

Cactus  ProFrac Holding

Poor diversification

The 3 months correlation between Cactus and ProFrac is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc 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 Cactus 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 Cactus Inc 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 Cactus i.e., Cactus and ProFrac Holding go up and down completely randomly.

Pair Corralation between Cactus and ProFrac Holding

Considering the 90-day investment horizon Cactus Inc is expected to under-perform the ProFrac Holding. But the stock apears to be less risky and, when comparing its historical volatility, Cactus Inc is 1.88 times less risky than ProFrac Holding. The stock trades about -0.14 of its potential returns per unit of risk. The ProFrac Holding Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  744.00  in ProFrac Holding Corp on December 25, 2024 and sell it today you would earn a total of  57.00  from holding ProFrac Holding Corp or generate 7.66% return on investment over 90 days.

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

Cactus Inc  vs.  ProFrac Holding Corp

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ProFrac Holding Corp

Risk-Adjusted Performance

Insignificant

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

The main advantage of trading using opposite Cactus and ProFrac Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cactus 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 Cactus Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.