Correlation Between Western Sierra and ChampionX
Can any of the company-specific risk be diversified away by investing in both Western Sierra 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 Western Sierra and ChampionX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Sierra Mining and ChampionX, you can compare the effects of market volatilities on Western Sierra 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 Western Sierra with a short position of ChampionX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Sierra and ChampionX.
Diversification Opportunities for Western Sierra and ChampionX
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and ChampionX is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and Western Sierra 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 Western Sierra Mining 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 Western Sierra i.e., Western Sierra and ChampionX go up and down completely randomly.
Pair Corralation between Western Sierra and ChampionX
Given the investment horizon of 90 days Western Sierra Mining is expected to generate 77.88 times more return on investment than ChampionX. However, Western Sierra is 77.88 times more volatile than ChampionX. It trades about 0.14 of its potential returns per unit of risk. ChampionX is currently generating about -0.02 per unit of risk. If you would invest 0.88 in Western Sierra Mining on September 3, 2024 and sell it today you would lose (0.20) from holding Western Sierra Mining or give up 22.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.32% |
| Values | Daily Returns |
Western Sierra Mining vs. ChampionX
Performance |
| Timeline |
| Western Sierra Mining |
| ChampionX |
Western Sierra and ChampionX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Sierra and ChampionX
The main advantage of trading using opposite Western Sierra and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Sierra 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.| Western Sierra vs. Green Cures Botanical | Western Sierra vs. Cann American Corp | Western Sierra vs. Galexxy Holdings | Western Sierra vs. Indoor Harvest Corp |
| ChampionX vs. Expro Group Holdings | ChampionX vs. Ranger Energy Services | ChampionX vs. Cactus Inc | ChampionX vs. MRC Global |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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