Correlation Between DR Horton and ChampionX

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

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

Diversification Opportunities for DR Horton and ChampionX

0.68

Correlation Coefficient

DR Horton  ChampionX

Poor diversification

The 3 months correlation between DHI and ChampionX is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding DR Horton and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and DR Horton 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 DR Horton 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 DR Horton i.e., DR Horton and ChampionX go up and down completely randomly.

Pair Corralation between DR Horton and ChampionX

Considering the 90-day investment horizon DR Horton is expected to generate 0.92 times more return on investment than ChampionX. However, DR Horton is 1.09 times less risky than ChampionX. It trades about 0.05 of its potential returns per unit of risk. ChampionX is currently generating about 0.0 per unit of risk. If you would invest  9,117  in DR Horton on September 29, 2024 and sell it today you would earn a total of  4,911  from holding DR Horton or generate 53.87% return on investment over 90 days.

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

DR Horton  vs.  ChampionX

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent 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 recent confusion may also be a sign of long-lasting up-swing for the firm 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 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.

Pair Trading with DR Horton and ChampionX

The main advantage of trading using opposite DR Horton and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DR Horton 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 DR Horton 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.