Correlation Between KLX Energy and Target Hospitality
Can any of the company-specific risk be diversified away by investing in both KLX Energy and Target Hospitality 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 Target Hospitality 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 Target Hospitality Corp, you can compare the effects of market volatilities on KLX Energy and Target Hospitality 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 Target Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLX Energy and Target Hospitality.
Diversification Opportunities for KLX Energy and Target Hospitality
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between KLX and Target is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding KLX Energy Services and Target Hospitality Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Hospitality Corp 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 Target Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Hospitality Corp has no effect on the direction of KLX Energy i.e., KLX Energy and Target Hospitality go up and down completely randomly.
Pair Corralation between KLX Energy and Target Hospitality
Given the investment horizon of 90 days KLX Energy Services is expected to under-perform the Target Hospitality. In addition to that, KLX Energy is 1.6 times more volatile than Target Hospitality Corp. It trades about -0.07 of its total potential returns per unit of risk. Target Hospitality Corp is currently generating about -0.08 per unit of volatility. If you would invest 948.00 in Target Hospitality Corp on November 8, 2024 and sell it today you would lose (59.00) from holding Target Hospitality Corp or give up 6.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KLX Energy Services vs. Target Hospitality Corp
Performance |
| Timeline |
| KLX Energy Services |
| Target Hospitality Corp |
KLX Energy and Target Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLX Energy and Target Hospitality
The main advantage of trading using opposite KLX Energy and Target Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLX Energy position performs unexpectedly, Target Hospitality 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 Target Hospitality will offset losses from the drop in Target Hospitality's long position.| KLX Energy vs. RPC Inc | KLX Energy vs. ProPetro Holding Corp | KLX Energy vs. Ranger Energy Services | KLX Energy vs. Flotek Industries |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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