Correlation Between Flotek Industries and Nextier Oilfield

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Can any of the company-specific risk be diversified away by investing in both Flotek Industries and Nextier 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 Nextier 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 Nextier Oilfield Solutions, you can compare the effects of market volatilities on Flotek Industries and Nextier 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 Nextier Oilfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flotek Industries and Nextier Oilfield.

Diversification Opportunities for Flotek Industries and Nextier Oilfield

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Flotek and Nextier is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Flotek Industries and Nextier Oilfield Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextier Oilfield Sol 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 Nextier Oilfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextier Oilfield Sol has no effect on the direction of Flotek Industries i.e., Flotek Industries and Nextier Oilfield go up and down completely randomly.

Pair Corralation between Flotek Industries and Nextier Oilfield

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 Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy1.56%
ValuesDaily Returns

Flotek Industries  vs.  Nextier Oilfield Solutions

 Performance 
       Timeline  
Flotek Industries 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
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.
Nextier Oilfield Sol 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nextier Oilfield Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Nextier Oilfield is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Flotek Industries and Nextier Oilfield Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Flotek Industries and Nextier Oilfield

The main advantage of trading using opposite Flotek Industries and Nextier Oilfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flotek Industries position performs unexpectedly, Nextier 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 Nextier Oilfield will offset losses from the drop in Nextier Oilfield's long position.
The idea behind Flotek Industries and Nextier Oilfield Solutions 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.
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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