Correlation Between ProPetro Holding and Flotek Industries
Can any of the company-specific risk be diversified away by investing in both ProPetro Holding 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 ProPetro Holding and Flotek Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProPetro Holding Corp and Flotek Industries, you can compare the effects of market volatilities on ProPetro Holding 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 ProPetro Holding with a short position of Flotek Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProPetro Holding and Flotek Industries.
Diversification Opportunities for ProPetro Holding and Flotek Industries
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProPetro and Flotek is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ProPetro Holding Corp and Flotek Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flotek Industries and ProPetro Holding 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 ProPetro Holding Corp 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 ProPetro Holding i.e., ProPetro Holding and Flotek Industries go up and down completely randomly.
Pair Corralation between ProPetro Holding and Flotek Industries
Given the investment horizon of 90 days ProPetro Holding is expected to generate 1.06 times less return on investment than Flotek Industries. But when comparing it to its historical volatility, ProPetro Holding Corp is 3.48 times less risky than Flotek Industries. It trades about 0.61 of its potential returns per unit of risk. Flotek Industries is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 736.00 in Flotek Industries on October 20, 2024 and sell it today you would earn a total of 148.00 from holding Flotek Industries or generate 20.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProPetro Holding Corp vs. Flotek Industries
Performance |
| Timeline |
| ProPetro Holding Corp |
| Flotek Industries |
ProPetro Holding and Flotek Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProPetro Holding and Flotek Industries
The main advantage of trading using opposite ProPetro Holding and Flotek Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProPetro Holding 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.| ProPetro Holding vs. Ranger Energy Services | ProPetro Holding vs. RPC Inc | ProPetro Holding vs. Archrock | ProPetro Holding vs. Bristow Group |
| Flotek Industries vs. ProPetro Holding Corp | Flotek Industries vs. Liberty Oilfield Services | Flotek Industries vs. KLX Energy Services | Flotek Industries vs. MRC Global |
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 the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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