Correlation Between ProFrac Holding and Atlas Lithium

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

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

Diversification Opportunities for ProFrac Holding and Atlas Lithium

-0.35

Correlation Coefficient

ProFrac Holding  Atlas Lithium

Very good diversification

The 3 months correlation between ProFrac and Atlas is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding ProFrac Holding Corp and Atlas Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Lithium and ProFrac 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 ProFrac Holding Corp are associated (or correlated) with Atlas Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Lithium has no effect on the direction of ProFrac Holding i.e., ProFrac Holding and Atlas Lithium go up and down completely randomly.

Pair Corralation between ProFrac Holding and Atlas Lithium

Given the investment horizon of 90 days ProFrac Holding Corp is expected to under-perform the Atlas Lithium. But the stock apears to be less risky and, when comparing its historical volatility, ProFrac Holding Corp is 2.31 times less risky than Atlas Lithium. The stock trades about -0.02 of its potential returns per unit of risk. The Atlas Lithium is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  488.00  in Atlas Lithium on January 24, 2024 and sell it today you would earn a total of  864.00  from holding Atlas Lithium or generate 177.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.59%
Values	Daily Returns

ProFrac Holding Corp  vs.  Atlas Lithium

ProFrac Holding Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProFrac Holding Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, ProFrac Holding may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Atlas Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlas Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ProFrac Holding and Atlas Lithium

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

The idea behind ProFrac Holding Corp and Atlas Lithium 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.