Correlation Between Cactus and Weatherford International

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

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

Diversification Opportunities for Cactus and Weatherford International

0.76

Correlation Coefficient

Cactus  Weatherford International

Poor diversification

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

Pair Corralation between Cactus and Weatherford International

Considering the 90-day investment horizon Cactus is expected to generate 16.66 times less return on investment than Weatherford International. But when comparing it to its historical volatility, Cactus Inc is 1.2 times less risky than Weatherford International. It trades about 0.01 of its potential returns per unit of risk. Weatherford International PLC is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,303  in Weatherford International PLC on May 7, 2025 and sell it today you would earn a total of  1,282  from holding Weatherford International PLC or generate 29.79% return on investment over 90 days.

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

Cactus Inc  vs.  Weatherford International PLC

Cactus Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Cactus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Cactus is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Weatherford International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weatherford International PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Weatherford International exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cactus and Weatherford International

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

The idea behind Cactus Inc and Weatherford International PLC 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.