Correlation Between Flotek Industries and North American

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

By analyzing existing cross correlation between Flotek Industries and North American Construction, you can compare the effects of market volatilities on Flotek Industries and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flotek Industries and North American.

Diversification Opportunities for Flotek Industries and North American

0.64

Correlation Coefficient

Flotek Industries  North American

Poor diversification

The 3 months correlation between Flotek and North is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Flotek Industries and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Flotek Industries i.e., Flotek Industries and North American go up and down completely randomly.

Pair Corralation between Flotek Industries and North American

Considering the 90-day investment horizon Flotek Industries is expected to generate 1.67 times more return on investment than North American. However, Flotek Industries is 1.67 times more volatile than North American Construction. It trades about 0.31 of its potential returns per unit of risk. North American Construction is currently generating about 0.04 per unit of risk. If you would invest  400.00  in Flotek Industries on September 5, 2024 and sell it today you would earn a total of  484.00  from holding Flotek Industries or generate 121.0% return on investment over 90 days.

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

Flotek Industries  vs.  North American Construction

Flotek Industries

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flotek Industries are ranked lower than 24 (%) 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.

North American Const

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, North American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Flotek Industries and North American

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

The idea behind Flotek Industries and North American Construction 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.