Correlation Between KLX Energy and Oil States

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

By analyzing existing cross correlation between KLX Energy Services and Oil States International, you can compare the effects of market volatilities on KLX Energy and Oil States 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 KLX Energy with a short position of Oil States. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLX Energy and Oil States.

Diversification Opportunities for KLX Energy and Oil States

0.64

Correlation Coefficient

KLX Energy  Oil States

Poor diversification

The 3 months correlation between KLX and Oil is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding KLX Energy Services and Oil States International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil States International and KLX Energy 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 KLX Energy Services are associated (or correlated) with Oil States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil States International has no effect on the direction of KLX Energy i.e., KLX Energy and Oil States go up and down completely randomly.

Pair Corralation between KLX Energy and Oil States

Given the investment horizon of 90 days KLX Energy Services is expected to under-perform the Oil States. In addition to that, KLX Energy is 1.38 times more volatile than Oil States International. It trades about -0.05 of its total potential returns per unit of risk. Oil States International is currently generating about -0.02 per unit of volatility. If you would invest  712.00  in Oil States International on September 19, 2024 and sell it today you would lose (190.50) from holding Oil States International or give up 26.76% of portfolio value over 90 days.

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

KLX Energy Services  vs.  Oil States International

KLX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Oil States International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil States International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Oil States is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KLX Energy and Oil States

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

The idea behind KLX Energy Services and Oil States International 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.