Correlation Between Nextier Oilfield and Flotek Industries

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

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

Diversification Opportunities for Nextier Oilfield and Flotek Industries

0.87

Correlation Coefficient

Nextier Oilfield  Flotek Industries

Very poor diversification

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

Pair Corralation between Nextier Oilfield and Flotek Industries

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 Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

Nextier Oilfield Solutions  vs.  Flotek Industries

Nextier Oilfield Sol

Risk-Adjusted Performance

0 of 100

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

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.

Pair Trading with Nextier Oilfield and Flotek Industries

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

The idea behind Nextier Oilfield Solutions and Flotek Industries 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.