Did the Worst-Performing Oilfield Stocks Take Cues from Crude Oil?

Flotek Industries’ correlation with crude oil

We’ll now analyze the correlation between the stock prices of Flotek Industries (FTK), Tesco Corporation (TESO), Fairmount Santrol Holdings (FMSA), Nabors Industries (NBR), and Key Energy Services (KEG) with West Texas Intermediate (or WTI) crude oil prices.

The correlation coefficient between Flotek Industries’ stock price and crude oil prices from December 30, 2016, to November 20, 2017, was -0.47. Returns over this period indicate a negative relationship between FTK’s stock and crude oil prices. The correlation coefficient between Flotek Industries and the Dow Jones Industrial Average (DJIA-INDEX) was -0.71 since December 30, 2016.Did the Worst-Performing Oilfield Stocks Take Cues from Crude Oil?

Correlation between TESO, NBR, FMSA, KEG, and crude oil

As we noted in the graph above, the VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil since December 30, 2016, was 0.41. Tesco Corporation’s correlation coefficient was -0.24. Nabors Industries’ correlation coefficient was -0.45. Fairmount Santrol Holdings’ correlation coefficient was positive during the period (0.32) while Key Energy Services’ correlation was 0.49.

We note in the graph above that all four oilfield services companies’ correlation with crude oil price has fallen from December 30, 2016, to November 20, 2017, compared to the previous year. KEG’s correlation with crude oil in the previous years isn’t available.

What does crude oil’s correlation mean for OFS stocks?

A high correlation means the stock was more affected by crude oil’s movement. A negative correlation implies that the stock moved inversely to crude oil’s moves. A low correlation means that the energy stock moved independently of crude oil’s moves.

In the next article, we’ll look at Wall Street’s recommendations for these year-to-date worst performing OFS stocks.