Correlation Between Cactus and Koil Energy

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

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

Diversification Opportunities for Cactus and Koil Energy

0.56

Correlation Coefficient

Cactus  Koil Energy

Very weak diversification

The 3 months correlation between Cactus and Koil is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and Koil Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koil Energy Solutions 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 Koil Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koil Energy Solutions has no effect on the direction of Cactus i.e., Cactus and Koil Energy go up and down completely randomly.

Pair Corralation between Cactus and Koil Energy

Considering the 90-day investment horizon Cactus Inc is expected to under-perform the Koil Energy. But the stock apears to be less risky and, when comparing its historical volatility, Cactus Inc is 2.41 times less risky than Koil Energy. The stock trades about -0.15 of its potential returns per unit of risk. The Koil Energy Solutions is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  145.00  in Koil Energy Solutions on September 12, 2024 and sell it today you would earn a total of  53.00  from holding Koil Energy Solutions or generate 36.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Cactus Inc  vs.  Koil Energy Solutions

Cactus Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cactus Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Cactus exhibited solid returns over the last few months and may actually be approaching a breakup point.

Koil Energy Solutions

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Koil Energy Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Koil Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cactus and Koil Energy

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

The idea behind Cactus Inc and Koil Energy Solutions 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.