Correlation Between Cactus and Now

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

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

Diversification Opportunities for Cactus and Now

0.85

Correlation Coefficient

Cactus  Now

Very poor diversification

The 3 months correlation between Cactus and Now is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and Now Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now Inc 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 Now. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Inc has no effect on the direction of Cactus i.e., Cactus and Now go up and down completely randomly.

Pair Corralation between Cactus and Now

Considering the 90-day investment horizon Cactus is expected to generate 2.12 times less return on investment than Now. In addition to that, Cactus is 1.14 times more volatile than Now Inc. It trades about 0.04 of its total potential returns per unit of risk. Now Inc is currently generating about 0.09 per unit of volatility. If you would invest  1,281  in Now Inc on September 18, 2024 and sell it today you would earn a total of  146.00  from holding Now Inc or generate 11.4% return on investment over 90 days.

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

Cactus Inc  vs.  Now Inc

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.

Now Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Now may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cactus and Now

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

The idea behind Cactus Inc and Now 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.