Correlation Between ProFrac Holding and Dmc Global

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

Diversification Opportunities for ProFrac Holding and Dmc Global

0.47

Correlation Coefficient

ProFrac Holding  Dmc Global

Very weak diversification

The 3 months correlation between ProFrac and Dmc is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ProFrac Holding Corp and Dmc Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dmc Global 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 Dmc Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dmc Global has no effect on the direction of ProFrac Holding i.e., ProFrac Holding and Dmc Global go up and down completely randomly.

Pair Corralation between ProFrac Holding and Dmc Global

Given the investment horizon of 90 days ProFrac Holding Corp is expected to generate 1.75 times more return on investment than Dmc Global. However, ProFrac Holding is 1.75 times more volatile than Dmc Global. It trades about 0.03 of its potential returns per unit of risk. Dmc Global is currently generating about -0.28 per unit of risk. If you would invest  800.00  in ProFrac Holding Corp on January 26, 2024 and sell it today you would earn a total of  10.00  from holding ProFrac Holding Corp or generate 1.25% return on investment over 90 days.

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

ProFrac Holding Corp  vs.  Dmc Global

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 uncertain fundamental indicators, ProFrac Holding may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Dmc Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dmc Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dmc Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ProFrac Holding and Dmc Global

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

The idea behind ProFrac Holding Corp and Dmc Global 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.