Correlation Between Cactus and ChampionX

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

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

Diversification Opportunities for Cactus and ChampionX

-0.06

Correlation Coefficient

Cactus  ChampionX

Good diversification

The 3 months correlation between Cactus and ChampionX is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and Cactus 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 Cactus Inc 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 Cactus i.e., Cactus and ChampionX go up and down completely randomly.

Pair Corralation between Cactus and ChampionX

Considering the 90-day investment horizon Cactus Inc is expected to under-perform the ChampionX. In addition to that, Cactus is 1.11 times more volatile than ChampionX. It trades about -0.15 of its total potential returns per unit of risk. ChampionX is currently generating about 0.11 per unit of volatility. If you would invest  2,661  in ChampionX on December 29, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cactus Inc  vs.  ChampionX

Cactus Inc

Risk-Adjusted Performance

Very Weak

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

ChampionX

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChampionX are ranked lower than 8 (%) 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 Cactus and ChampionX

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

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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.