Correlation Between China Oilfield and ChampionX

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

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

Diversification Opportunities for China Oilfield and ChampionX

0.19

Correlation Coefficient

China Oilfield  ChampionX

Average diversification

The 3 months correlation between China and ChampionX is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding China Oilfield Services and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and China Oilfield 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 China Oilfield Services 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 China Oilfield i.e., China Oilfield and ChampionX go up and down completely randomly.

Pair Corralation between China Oilfield and ChampionX

Assuming the 90 days horizon China Oilfield Services is expected to generate 1.52 times more return on investment than ChampionX. However, China Oilfield is 1.52 times more volatile than ChampionX. It trades about 0.02 of its potential returns per unit of risk. ChampionX is currently generating about 0.01 per unit of risk. If you would invest  69.00  in China Oilfield Services on September 29, 2024 and sell it today you would earn a total of  11.00  from holding China Oilfield Services or generate 15.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

China Oilfield Services  vs.  ChampionX

China Oilfield Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Oilfield Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Oilfield is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ChampionX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChampionX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ChampionX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Oilfield and ChampionX

The main advantage of trading using opposite China Oilfield and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Oilfield 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 China Oilfield Services 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.