Correlation Between Now and ChampionX

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

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

Diversification Opportunities for Now and ChampionX

0.62

Correlation Coefficient

Now  ChampionX

Poor diversification

The 3 months correlation between Now and ChampionX is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and Now 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 Now Inc 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 Now i.e., Now and ChampionX go up and down completely randomly.

Pair Corralation between Now and ChampionX

Given the investment horizon of 90 days Now Inc is expected to generate 1.72 times more return on investment than ChampionX. However, Now is 1.72 times more volatile than ChampionX. It trades about 0.05 of its potential returns per unit of risk. ChampionX is currently generating about -0.03 per unit of risk. If you would invest  1,505  in Now Inc on November 28, 2024 and sell it today you would earn a total of  101.00  from holding Now Inc or generate 6.71% return on investment over 90 days.

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

Now Inc  vs.  ChampionX

Now Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Now may actually be approaching a critical reversion point that can send shares even higher in March 2025.

ChampionX

Risk-Adjusted Performance

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Now and ChampionX

The main advantage of trading using opposite Now and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now 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 Now Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.