Correlation Between Cactus and Halliburton

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

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

Diversification Opportunities for Cactus and Halliburton

0.8

Correlation Coefficient

Cactus  Halliburton

Very poor diversification

The 3 months correlation between Cactus and Halliburton is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of Cactus i.e., Cactus and Halliburton go up and down completely randomly.

Pair Corralation between Cactus and Halliburton

Considering the 90-day investment horizon Cactus Inc is expected to under-perform the Halliburton. In addition to that, Cactus is 1.18 times more volatile than Halliburton. It trades about -0.16 of its total potential returns per unit of risk. Halliburton is currently generating about -0.05 per unit of volatility. If you would invest  2,677  in Halliburton on December 30, 2024 and sell it today you would lose (170.00) from holding Halliburton or give up 6.35% of portfolio value over 90 days.

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

Cactus Inc  vs.  Halliburton

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.

Halliburton

Risk-Adjusted Performance

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Halliburton is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Cactus and Halliburton

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

The idea behind Cactus Inc and Halliburton 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.