Correlation Between Flotek Industries and Archrock

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

Diversification Opportunities for Flotek Industries and Archrock

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Flotek and Archrock is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Flotek Industries and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock 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 Archrock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archrock has no effect on the direction of Flotek Industries i.e., Flotek Industries and Archrock go up and down completely randomly.

Pair Corralation between Flotek Industries and Archrock

Considering the 90-day investment horizon Flotek Industries is expected to generate 1.16 times more return on investment than Archrock. However, Flotek Industries is 1.16 times more volatile than Archrock. It trades about 0.07 of its potential returns per unit of risk. Archrock is currently generating about -0.06 per unit of risk. If you would invest  115.00  in Flotek Industries on May 15, 2022 and sell it today you would earn a total of  9.00  from holding Flotek Industries or generate 7.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Flotek Industries  vs.  Archrock

 Performance (%) 
       Timeline  
Flotek Industries 
Flotek Performance
0 of 100
Over the last 90 days Flotek Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Flotek Industries is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Flotek Price Channel

Archrock 
Archrock Performance
0 of 100
Over the last 90 days Archrock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Archrock Price Channel

Flotek Industries and Archrock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Flotek Industries and Archrock

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

Flotek Industries

Pair trading matchups for Flotek Industries

The idea behind Flotek Industries and Archrock 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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