Correlation Between Flotek Industries and Alphabet

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

Diversification Opportunities for Flotek Industries and Alphabet

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Flotek and Alphabet is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Flotek Industries and Alphabet Cl A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Cl A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Cl A has no effect on the direction of Flotek Industries i.e., Flotek Industries and Alphabet go up and down completely randomly.

Pair Corralation between Flotek Industries and Alphabet

Considering the 90-day investment horizon Flotek Industries is expected to generate 1.93 times more return on investment than Alphabet. However, Flotek Industries is 1.93 times more volatile than Alphabet Cl A. It trades about 0.1 of its potential returns per unit of risk. Alphabet Cl A is currently generating about -0.18 per unit of risk. If you would invest  102.00  in Flotek Industries on July 6, 2022 and sell it today you would earn a total of  7.00  from holding Flotek Industries or generate 6.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

Flotek Industries  vs.  Alphabet Cl A

 Performance (%) 
       Timeline  
Flotek Industries 
Flotek Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Flotek Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Flotek Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Flotek Price Channel

Alphabet Cl A 
Alphabet Performance
0 of 100
Over the last 90 days Alphabet Cl A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in November 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Alphabet Price Channel

Flotek Industries and Alphabet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Flotek Industries and Alphabet

The main advantage of trading using opposite Flotek Industries and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flotek Industries position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.
Flotek Industries vs. Amazon Inc
The idea behind Flotek Industries and Alphabet Cl A 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.
Alphabet vs. Tencent Holdings
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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