Correlation Between Cactus and Pardee Resources

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

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

Diversification Opportunities for Cactus and Pardee Resources

-0.3

Correlation Coefficient

Cactus  Pardee Resources

Very good diversification

The 3 months correlation between Cactus and Pardee is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and Pardee Resources Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pardee Resources 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 Pardee Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pardee Resources has no effect on the direction of Cactus i.e., Cactus and Pardee Resources go up and down completely randomly.

Pair Corralation between Cactus and Pardee Resources

Considering the 90-day investment horizon Cactus Inc is expected to under-perform the Pardee Resources. In addition to that, Cactus is 1.5 times more volatile than Pardee Resources Co. It trades about -0.15 of its total potential returns per unit of risk. Pardee Resources Co is currently generating about 0.1 per unit of volatility. If you would invest  31,355  in Pardee Resources Co on December 28, 2024 and sell it today you would earn a total of  2,645  from holding Pardee Resources Co or generate 8.44% return on investment over 90 days.

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

Cactus Inc  vs.  Pardee Resources Co

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 uncertain 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.

Pardee Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pardee Resources Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Pardee Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cactus and Pardee Resources

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

The idea behind Cactus Inc and Pardee Resources Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.