Correlation Between Forum Energy and Flotek Industries

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

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

Diversification Opportunities for Forum Energy and Flotek Industries

0.76

Correlation Coefficient

Forum Energy  Flotek Industries

Poor diversification

The 3 months correlation between Forum and Flotek is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Technologies and Flotek Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flotek Industries and Forum Energy 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 Forum Energy Technologies 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 Forum Energy i.e., Forum Energy and Flotek Industries go up and down completely randomly.

Pair Corralation between Forum Energy and Flotek Industries

Considering the 90-day investment horizon Forum Energy is expected to generate 3.1 times less return on investment than Flotek Industries. But when comparing it to its historical volatility, Forum Energy Technologies is 1.38 times less risky than Flotek Industries. It trades about 0.03 of its potential returns per unit of risk. Flotek Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  491.00  in Flotek Industries on January 18, 2025 and sell it today you would earn a total of  191.00  from holding Flotek Industries or generate 38.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Forum Energy Technologies  vs.  Flotek Industries

Forum Energy Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forum Energy Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Flotek Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flotek Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Forum Energy and Flotek Industries

The main advantage of trading using opposite Forum Energy and Flotek Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forum Energy 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 Forum Energy Technologies 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.