Correlation Between Flotek Industries and CSI Compressco

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

Diversification Opportunities for Flotek Industries and CSI Compressco

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Flotek and CSI Compressco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Flotek Industries and CSI Compressco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSI Compressco 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 CSI Compressco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSI Compressco has no effect on the direction of Flotek Industries i.e., Flotek Industries and CSI Compressco go up and down completely randomly.

Pair Corralation between Flotek Industries and CSI Compressco

Considering the 90-day investment horizon Flotek Industries is expected to under-perform the CSI Compressco. But the stock apears to be less risky and, when comparing its historical volatility, Flotek Industries is 1.42 times less risky than CSI Compressco. The stock trades about -0.01 of its potential returns per unit of risk. The CSI Compressco is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  129.00  in CSI Compressco on May 21, 2022 and sell it today you would lose (3.00)  from holding CSI Compressco or give up 2.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Flotek Industries  vs.  CSI Compressco

 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 latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Flotek Price Channel

CSI Compressco 
CSI Compressco Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in CSI Compressco are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, CSI Compressco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

CSI Compressco Price Channel

Flotek Industries and CSI Compressco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Flotek Industries and CSI Compressco

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

CSI Compressco

Pair trading matchups for CSI Compressco

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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