Correlation Between Cactus and KLX Energy
Can any of the company-specific risk be diversified away by investing in both Cactus 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 Cactus and KLX Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cactus Inc and KLX Energy Services, you can compare the effects of market volatilities on Cactus 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 Cactus with a short position of KLX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cactus and KLX Energy.
Diversification Opportunities for Cactus and KLX Energy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cactus and KLX is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc 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 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 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 Cactus i.e., Cactus and KLX Energy go up and down completely randomly.
Pair Corralation between Cactus and KLX Energy
Considering the 90-day investment horizon Cactus is expected to generate 3.86 times less return on investment than KLX Energy. But when comparing it to its historical volatility, Cactus Inc is 3.43 times less risky than KLX Energy. It trades about 0.37 of its potential returns per unit of risk. KLX Energy Services is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 441.00 in KLX Energy Services on October 20, 2024 and sell it today you would earn a total of 224.00 from holding KLX Energy Services or generate 50.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cactus Inc vs. KLX Energy Services
Performance |
| Timeline |
| Cactus Inc |
| KLX Energy Services |
Cactus and KLX Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cactus and KLX Energy
The main advantage of trading using opposite Cactus and KLX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cactus 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.| Cactus vs. ChampionX | Cactus vs. Expro Group Holdings | Cactus vs. Ranger Energy Services | Cactus vs. MRC Global |
| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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