Correlation Between ChampionX and KLX Energy

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

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

Diversification Opportunities for ChampionX and KLX Energy

0.74

Correlation Coefficient

ChampionX  KLX Energy

Poor diversification

The 3 months correlation between ChampionX and KLX is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ChampionX 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 ChampionX 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 ChampionX 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 ChampionX i.e., ChampionX and KLX Energy go up and down completely randomly.

Pair Corralation between ChampionX and KLX Energy

Considering the 90-day investment horizon ChampionX is expected to generate 0.47 times more return on investment than KLX Energy. However, ChampionX is 2.13 times less risky than KLX Energy. It trades about 0.02 of its potential returns per unit of risk. KLX Energy Services is currently generating about -0.01 per unit of risk. If you would invest  2,583  in ChampionX on September 19, 2024 and sell it today you would earn a total of  171.00  from holding ChampionX or generate 6.62% return on investment over 90 days.

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

ChampionX  vs.  KLX Energy Services

ChampionX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChampionX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 ChampionX and KLX Energy

The main advantage of trading using opposite ChampionX and KLX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChampionX 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 ChampionX 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.