Correlation Between Flotek Industries and Liberty Oilfield

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

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

Diversification Opportunities for Flotek Industries and Liberty Oilfield

-0.41

Correlation Coefficient

Flotek Industries  Liberty Oilfield

Very good diversification

The 3 months correlation between Flotek and Liberty is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Flotek Industries and Liberty Oilfield Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Oilfield Services and Flotek Industries 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 Flotek Industries are associated (or correlated) with Liberty Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Oilfield Services has no effect on the direction of Flotek Industries i.e., Flotek Industries and Liberty Oilfield go up and down completely randomly.

Pair Corralation between Flotek Industries and Liberty Oilfield

Considering the 90-day investment horizon Flotek Industries is expected to generate 1.56 times more return on investment than Liberty Oilfield. However, Flotek Industries is 1.56 times more volatile than Liberty Oilfield Services. It trades about 0.29 of its potential returns per unit of risk. Liberty Oilfield Services is currently generating about -0.03 per unit of risk. If you would invest  401.00  in Flotek Industries on August 31, 2024 and sell it today you would earn a total of  449.00  from holding Flotek Industries or generate 111.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Flotek Industries  vs.  Liberty Oilfield Services

Flotek Industries

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flotek Industries are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Flotek Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Liberty Oilfield Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Oilfield Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Liberty Oilfield is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Flotek Industries and Liberty Oilfield

The main advantage of trading using opposite Flotek Industries and Liberty Oilfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flotek Industries position performs unexpectedly, Liberty Oilfield 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 Liberty Oilfield will offset losses from the drop in Liberty Oilfield's long position.

The idea behind Flotek Industries and Liberty Oilfield Services 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.