Correlation Between ChampionX and ProPetro Holding

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

By analyzing existing cross correlation between ChampionX and ProPetro Holding Corp, you can compare the effects of market volatilities on ChampionX and ProPetro Holding 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 ProPetro Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChampionX and ProPetro Holding.

Diversification Opportunities for ChampionX and ProPetro Holding

0.21

Correlation Coefficient

ChampionX  ProPetro Holding

Modest diversification

The 3 months correlation between ChampionX and ProPetro is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ChampionX and ProPetro Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProPetro Holding Corp 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 ProPetro Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProPetro Holding Corp has no effect on the direction of ChampionX i.e., ChampionX and ProPetro Holding go up and down completely randomly.

Pair Corralation between ChampionX and ProPetro Holding

Considering the 90-day investment horizon ChampionX is expected to generate 3.42 times less return on investment than ProPetro Holding. But when comparing it to its historical volatility, ChampionX is 1.45 times less risky than ProPetro Holding. It trades about 0.0 of its potential returns per unit of risk. ProPetro Holding Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,028  in ProPetro Holding Corp on September 19, 2024 and sell it today you would lose (83.50) from holding ProPetro Holding Corp or give up 8.12% of portfolio value over 90 days.

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

ChampionX  vs.  ProPetro Holding Corp

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 unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ProPetro Holding Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProPetro Holding Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, ProPetro Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChampionX and ProPetro Holding

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

The idea behind ChampionX and ProPetro Holding Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.