Correlation Between Enservco and Flotek Industries

Can any of the company-specific risk be diversified away by investing in both Enservco 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 Enservco and Flotek Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enservco Co and Flotek Industries, you can compare the effects of market volatilities on Enservco 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 Enservco with a short position of Flotek Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enservco and Flotek Industries.

Diversification Opportunities for Enservco and Flotek Industries

0.03

Correlation Coefficient

Enservco  Flotek Industries

Significant diversification

The 3 months correlation between Enservco and Flotek is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Enservco Co and Flotek Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flotek Industries and Enservco 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 Enservco Co 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 Enservco i.e., Enservco and Flotek Industries go up and down completely randomly.

Pair Corralation between Enservco and Flotek Industries

Given the investment horizon of 90 days Enservco Co is expected to under-perform the Flotek Industries. In addition to that, Enservco is 1.61 times more volatile than Flotek Industries. It trades about -0.07 of its total potential returns per unit of risk. Flotek Industries is currently generating about 0.03 per unit of volatility. If you would invest  672.00  in Flotek Industries on September 20, 2024 and sell it today you would earn a total of  66.00  from holding Flotek Industries or generate 9.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.15%
Values	Daily Returns

Enservco Co  vs.  Flotek Industries

Enservco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enservco Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Flotek Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flotek Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Flotek Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enservco and Flotek Industries

The main advantage of trading using opposite Enservco and Flotek Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enservco 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.

The idea behind Enservco Co 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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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.