Correlation Between Superior Drilling and KLX Energy

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

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

Diversification Opportunities for Superior Drilling and KLX Energy

0.23

Correlation Coefficient

Superior Drilling  KLX Energy

Modest diversification

The 3 months correlation between Superior and KLX is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Superior Drilling Products and KLX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLX Energy Services and Superior Drilling 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 Superior Drilling Products are associated (or correlated) with KLX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLX Energy Services has no effect on the direction of Superior Drilling i.e., Superior Drilling and KLX Energy go up and down completely randomly.

Pair Corralation between Superior Drilling and KLX Energy

If you would invest (100.00) in Superior Drilling Products on September 25, 2024 and sell it today you would earn a total of  100.00  from holding Superior Drilling Products or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

Superior Drilling Products  vs.  KLX Energy Services

Superior Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Superior Drilling and KLX Energy

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

The idea behind Superior Drilling Products and KLX Energy Services 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.