Correlation Between KLX Energy and Solaris Oilfield

Can any of the company-specific risk be diversified away by investing in both KLX Energy and Solaris Oilfield 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 Solaris Oilfield 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 Solaris Oilfield Infrastructure, you can compare the effects of market volatilities on KLX Energy and Solaris Oilfield 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 Solaris Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLX Energy and Solaris Oilfield.

Diversification Opportunities for KLX Energy and Solaris Oilfield

-0.42

Correlation Coefficient

KLX Energy  Solaris Oilfield

Very good diversification

The 3 months correlation between KLX and Solaris is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding KLX Energy Services and Solaris Oilfield Infrastructur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solaris Oilfield Inf 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 Solaris Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solaris Oilfield Inf has no effect on the direction of KLX Energy i.e., KLX Energy and Solaris Oilfield go up and down completely randomly.

Pair Corralation between KLX Energy and Solaris Oilfield

Given the investment horizon of 90 days KLX Energy Services is expected to under-perform the Solaris Oilfield. In addition to that, KLX Energy is 1.15 times more volatile than Solaris Oilfield Infrastructure. It trades about -0.05 of its total potential returns per unit of risk. Solaris Oilfield Infrastructure is currently generating about 0.07 per unit of volatility. If you would invest  791.00  in Solaris Oilfield Infrastructure on September 19, 2024 and sell it today you would earn a total of  361.00  from holding Solaris Oilfield Infrastructure or generate 45.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	72.98%
Values	Daily Returns

KLX Energy Services  vs.  Solaris Oilfield Infrastructur

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.

Solaris Oilfield Inf

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KLX Energy and Solaris Oilfield

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

The idea behind KLX Energy Services and Solaris Oilfield Infrastructure 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.