Correlation Between ProPetro Holding and Liberty Oilfield

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

By analyzing existing cross correlation between ProPetro Holding Corp and Liberty Oilfield Services, you can compare the effects of market volatilities on ProPetro Holding and Liberty Oilfield 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 ProPetro Holding with a short position of Liberty Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProPetro Holding and Liberty Oilfield.

Diversification Opportunities for ProPetro Holding and Liberty Oilfield

0.76

Correlation Coefficient

ProPetro Holding  Liberty Oilfield

Poor diversification

The 3 months correlation between ProPetro and Liberty is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ProPetro Holding Corp and Liberty Oilfield Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Oilfield Services and ProPetro Holding 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 ProPetro Holding Corp are associated (or correlated) with Liberty Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Oilfield Services has no effect on the direction of ProPetro Holding i.e., ProPetro Holding and Liberty Oilfield go up and down completely randomly.

Pair Corralation between ProPetro Holding and Liberty Oilfield

Given the investment horizon of 90 days ProPetro Holding Corp is expected to under-perform the Liberty Oilfield. In addition to that, ProPetro Holding is 1.15 times more volatile than Liberty Oilfield Services. It trades about -0.01 of its total potential returns per unit of risk. Liberty Oilfield Services is currently generating about 0.02 per unit of volatility. If you would invest  1,647  in Liberty Oilfield Services on August 13, 2024 and sell it today you would earn a total of  121.00  from holding Liberty Oilfield Services or generate 7.35% return on investment over 90 days.

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

ProPetro Holding Corp  vs.  Liberty Oilfield Services

ProPetro Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProPetro Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, ProPetro Holding is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Liberty Oilfield Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Oilfield Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ProPetro Holding and Liberty Oilfield

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

The idea behind ProPetro Holding Corp and Liberty Oilfield 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.