Correlation Between Golden Goliath and Flotek Industries

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

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

Diversification Opportunities for Golden Goliath and Flotek Industries

0.11

Correlation Coefficient

Golden Goliath  Flotek Industries

Average diversification

The 3 months correlation between Golden and Flotek is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Golden Goliath Resources and Flotek Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flotek Industries and Golden Goliath 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 Golden Goliath Resources 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 Golden Goliath i.e., Golden Goliath and Flotek Industries go up and down completely randomly.

Pair Corralation between Golden Goliath and Flotek Industries

Assuming the 90 days horizon Golden Goliath Resources is expected to under-perform the Flotek Industries. In addition to that, Golden Goliath is 16.74 times more volatile than Flotek Industries. It trades about -0.15 of its total potential returns per unit of risk. Flotek Industries is currently generating about -0.05 per unit of volatility. If you would invest  352.00  in Flotek Industries on January 24, 2024 and sell it today you would lose (8.00) from holding Flotek Industries or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.18%
Values	Daily Returns

Golden Goliath Resources  vs.  Flotek Industries

Golden Goliath Resources

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Golden Goliath Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical indicators, Golden Goliath reported solid returns over the last few months and may actually be approaching a breakup point.

Flotek Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Flotek Industries are ranked lower than 4 (%) 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 Golden Goliath and Flotek Industries

The main advantage of trading using opposite Golden Goliath and Flotek Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Goliath 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 Golden Goliath Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..