Correlation Between Definitive Healthcare and ChampionX

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

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

Diversification Opportunities for Definitive Healthcare and ChampionX

0.05

Correlation Coefficient

Definitive Healthcare  ChampionX

Significant diversification

The 3 months correlation between Definitive and ChampionX is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and Definitive Healthcare 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 Definitive Healthcare Corp are associated (or correlated) with ChampionX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChampionX has no effect on the direction of Definitive Healthcare i.e., Definitive Healthcare and ChampionX go up and down completely randomly.

Pair Corralation between Definitive Healthcare and ChampionX

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to generate 1.77 times more return on investment than ChampionX. However, Definitive Healthcare is 1.77 times more volatile than ChampionX. It trades about 0.18 of its potential returns per unit of risk. ChampionX is currently generating about -0.4 per unit of risk. If you would invest  412.00  in Definitive Healthcare Corp on September 18, 2024 and sell it today you would earn a total of  34.00  from holding Definitive Healthcare Corp or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Definitive Healthcare Corp  vs.  ChampionX

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Definitive Healthcare is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 fairly strong technical indicators, ChampionX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Definitive Healthcare and ChampionX

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

The idea behind Definitive Healthcare Corp and ChampionX 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.