Correlation Between Hawkins and ChampionX

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

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

Diversification Opportunities for Hawkins and ChampionX

0.87

Correlation Coefficient

Hawkins  ChampionX

Very poor diversification

The 3 months correlation between Hawkins and ChampionX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hawkins and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX and Hawkins 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 Hawkins 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 Hawkins i.e., Hawkins and ChampionX go up and down completely randomly.

Pair Corralation between Hawkins and ChampionX

Given the investment horizon of 90 days Hawkins is expected to generate 1.4 times more return on investment than ChampionX. However, Hawkins is 1.4 times more volatile than ChampionX. It trades about 0.01 of its potential returns per unit of risk. ChampionX is currently generating about -0.51 per unit of risk. If you would invest  7,642  in Hawkins on February 4, 2024 and sell it today you would earn a total of  18.00  from holding Hawkins or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Hawkins  vs.  ChampionX

Hawkins

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward-looking signals, Hawkins displayed solid returns over the last few months and may actually be approaching a breakup point.

ChampionX

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ChampionX are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical indicators, ChampionX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hawkins and ChampionX

The main advantage of trading using opposite Hawkins and ChampionX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawkins 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 Hawkins 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.