Correlation Between ProPetro Holding and Dril Quip

Can any of the company-specific risk be diversified away by investing in both ProPetro Holding and Dril Quip 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 Dril Quip 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 Dril Quip, you can compare the effects of market volatilities on ProPetro Holding and Dril Quip 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 Dril Quip. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProPetro Holding and Dril Quip.

Diversification Opportunities for ProPetro Holding and Dril Quip

0.62

Correlation Coefficient

ProPetro Holding  Dril Quip

Poor diversification

The 3 months correlation between ProPetro and Dril is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ProPetro Holding Corp and Dril Quip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dril Quip 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 Dril Quip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dril Quip has no effect on the direction of ProPetro Holding i.e., ProPetro Holding and Dril Quip go up and down completely randomly.

Pair Corralation between ProPetro Holding and Dril Quip

Given the investment horizon of 90 days ProPetro Holding is expected to generate 1.04 times less return on investment than Dril Quip. In addition to that, ProPetro Holding is 1.32 times more volatile than Dril Quip. It trades about 0.1 of its total potential returns per unit of risk. Dril Quip is currently generating about 0.13 per unit of volatility. If you would invest  1,563  in Dril Quip on July 4, 2024 and sell it today you would earn a total of  25.00  from holding Dril Quip or generate 1.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	27.27%
Values	Daily Returns

ProPetro Holding Corp  vs.  Dril Quip

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

Dril Quip

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dril Quip has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in November 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with ProPetro Holding and Dril Quip

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

The idea behind ProPetro Holding Corp and Dril Quip 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.