Correlation Between Dawson Geophysical and ChampionX

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

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

Diversification Opportunities for Dawson Geophysical and ChampionX

0.2

Correlation Coefficient

Dawson Geophysical  ChampionX

Modest diversification

The 3 months correlation between Dawson and ChampionX is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dawson Geophysical and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and Dawson Geophysical 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 Dawson Geophysical 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 Dawson Geophysical i.e., Dawson Geophysical and ChampionX go up and down completely randomly.

Pair Corralation between Dawson Geophysical and ChampionX

Given the investment horizon of 90 days Dawson Geophysical is expected to under-perform the ChampionX. In addition to that, Dawson Geophysical is 1.91 times more volatile than ChampionX. It trades about -0.01 of its total potential returns per unit of risk. ChampionX is currently generating about -0.01 per unit of volatility. If you would invest  3,063  in ChampionX on December 3, 2024 and sell it today you would lose (83.00) from holding ChampionX or give up 2.71% of portfolio value over 90 days.

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

Dawson Geophysical  vs.  ChampionX

Dawson Geophysical

Risk-Adjusted Performance

Weak

Over the last 90 days Dawson Geophysical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dawson Geophysical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 Dawson Geophysical and ChampionX

The main advantage of trading using opposite Dawson Geophysical and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dawson Geophysical 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 Dawson Geophysical 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.