Correlation Between Concrete Pumping and KLX Energy

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

By analyzing existing cross correlation between Concrete Pumping Holdings and KLX Energy Services, you can compare the effects of market volatilities on Concrete Pumping and KLX Energy 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 Concrete Pumping with a short position of KLX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Concrete Pumping and KLX Energy.

Diversification Opportunities for Concrete Pumping and KLX Energy

0.04

Correlation Coefficient

Concrete Pumping  KLX Energy

Significant diversification

The 3 months correlation between Concrete and KLX is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Concrete Pumping Holdings and KLX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLX Energy Services and Concrete Pumping 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 Concrete Pumping Holdings are associated (or correlated) with KLX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLX Energy Services has no effect on the direction of Concrete Pumping i.e., Concrete Pumping and KLX Energy go up and down completely randomly.

Pair Corralation between Concrete Pumping and KLX Energy

Given the investment horizon of 90 days Concrete Pumping Holdings is expected to generate 0.65 times more return on investment than KLX Energy. However, Concrete Pumping Holdings is 1.53 times less risky than KLX Energy. It trades about 0.48 of its potential returns per unit of risk. KLX Energy Services is currently generating about -0.31 per unit of risk. If you would invest  552.00  in Concrete Pumping Holdings on September 19, 2024 and sell it today you would earn a total of  162.00  from holding Concrete Pumping Holdings or generate 29.35% return on investment over 90 days.

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

Concrete Pumping Holdings  vs.  KLX Energy Services

Concrete Pumping Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Concrete Pumping Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Concrete Pumping reported solid returns over the last few months and may actually be approaching a breakup point.

KLX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Concrete Pumping and KLX Energy

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

The idea behind Concrete Pumping Holdings and KLX Energy 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.