Correlation Between Calfrac Well and PHX Energy

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

By analyzing existing cross correlation between Calfrac Well Services and PHX Energy Services, you can compare the effects of market volatilities on Calfrac Well and PHX Energy 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 Calfrac Well with a short position of PHX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calfrac Well and PHX Energy.

Diversification Opportunities for Calfrac Well and PHX Energy

0.08

Correlation Coefficient

Calfrac Well  PHX Energy

Significant diversification

The 3 months correlation between Calfrac and PHX is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Calfrac Well Services and PHX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Energy Services and Calfrac Well 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 Calfrac Well Services are associated (or correlated) with PHX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Energy Services has no effect on the direction of Calfrac Well i.e., Calfrac Well and PHX Energy go up and down completely randomly.

Pair Corralation between Calfrac Well and PHX Energy

Assuming the 90 days trading horizon Calfrac Well Services is expected to under-perform the PHX Energy. But the stock apears to be less risky and, when comparing its historical volatility, Calfrac Well Services is 1.01 times less risky than PHX Energy. The stock trades about -0.03 of its potential returns per unit of risk. The PHX Energy Services is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  628.00  in PHX Energy Services on September 12, 2024 and sell it today you would earn a total of  304.00  from holding PHX Energy Services or generate 48.41% return on investment over 90 days.

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

Calfrac Well Services  vs.  PHX Energy Services

Calfrac Well Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calfrac Well Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Calfrac Well is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PHX Energy Services

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHX Energy Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, PHX Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Calfrac Well and PHX Energy

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

The idea behind Calfrac Well Services and PHX Energy Services 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.