Correlation Between Amazon and Flotek Industries

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Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Flotek Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Flotek Industries, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Flotek Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Flotek Industries.

Diversification Opportunities for Amazon and Flotek Industries

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Amazon and Flotek is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Flotek Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flotek Industries and Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Flotek Industries go up and down completely randomly.

Pair Corralation between Amazon and Flotek Industries

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Flotek Industries. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.42 times less risky than Flotek Industries. The stock trades about -0.15 of its potential returns per unit of risk. The Flotek Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Flotek Industries on September 6, 2022 and sell it today you would earn a total of  13.00  from holding Flotek Industries or generate 11.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Flotek Industries

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Flotek Industries 
Flotek Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Flotek Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Flotek Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Flotek Price Channel

Amazon and Flotek Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Flotek Industries

The main advantage of trading using opposite Amazon and Flotek Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
Amazon vs. Carvana Co
The idea behind Amazon Inc 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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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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