Correlation Between Oil States and ChampionX

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

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

Diversification Opportunities for Oil States and ChampionX

0.66

Correlation Coefficient

Oil States  ChampionX

Poor diversification

The 3 months correlation between Oil and ChampionX is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and Oil States 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 Oil States International 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 Oil States i.e., Oil States and ChampionX go up and down completely randomly.

Pair Corralation between Oil States and ChampionX

Considering the 90-day investment horizon Oil States is expected to generate 1.04 times less return on investment than ChampionX. In addition to that, Oil States is 1.51 times more volatile than ChampionX. It trades about 0.07 of its total potential returns per unit of risk. ChampionX is currently generating about 0.12 per unit of volatility. If you would invest  2,661  in ChampionX on December 28, 2024 and sell it today you would earn a total of  354.00  from holding ChampionX or generate 13.3% return on investment over 90 days.

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

Oil States International  vs.  ChampionX

Oil States International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oil States International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Oil States unveiled solid returns over the last few months and may actually be approaching a breakup point.

ChampionX

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChampionX are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, ChampionX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil States and ChampionX

The main advantage of trading using opposite Oil States and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil States 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 Oil States International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.