Correlation Between Nextier Oilfield and Cactus

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

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

Diversification Opportunities for Nextier Oilfield and Cactus

0.48

Correlation Coefficient

Nextier Oilfield  Cactus

Very weak diversification

The 3 months correlation between Nextier and Cactus is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nextier Oilfield Solutions and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc and Nextier Oilfield 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 Nextier Oilfield Solutions are associated (or correlated) with Cactus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cactus Inc has no effect on the direction of Nextier Oilfield i.e., Nextier Oilfield and Cactus go up and down completely randomly.

Pair Corralation between Nextier Oilfield and Cactus

If you would invest  6,060  in Cactus Inc on September 18, 2024 and sell it today you would earn a total of  234.00  from holding Cactus Inc or generate 3.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Nextier Oilfield Solutions  vs.  Cactus Inc

Nextier Oilfield Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextier Oilfield Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Nextier Oilfield is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cactus Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cactus Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Cactus is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nextier Oilfield and Cactus

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

The idea behind Nextier Oilfield Solutions and Cactus Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.