Correlation Between Cactus and Valaris

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

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

Diversification Opportunities for Cactus and Valaris

0.43

Correlation Coefficient

Cactus  Valaris

Very weak diversification

The 3 months correlation between Cactus and Valaris is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and Valaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valaris 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 Valaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valaris has no effect on the direction of Cactus i.e., Cactus and Valaris go up and down completely randomly.

Pair Corralation between Cactus and Valaris

Considering the 90-day investment horizon Cactus Inc is expected to generate 0.61 times more return on investment than Valaris. However, Cactus Inc is 1.65 times less risky than Valaris. It trades about -0.16 of its potential returns per unit of risk. Valaris is currently generating about -0.1 per unit of risk. If you would invest  6,853  in Cactus Inc on November 28, 2024 and sell it today you would lose (1,005) from holding Cactus Inc or give up 14.67% of portfolio value over 90 days.

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

Cactus Inc  vs.  Valaris

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

Valaris

Risk-Adjusted Performance

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 March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Cactus and Valaris

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

The idea behind Cactus Inc and Valaris 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.