Correlation Between Archer and Western Energy
Can any of the company-specific risk be diversified away by investing in both Archer and Western Energy 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 Archer and Western Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Archer Limited and Western Energy Services, you can compare the effects of market volatilities on Archer and Western Energy 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 Archer with a short position of Western Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer and Western Energy.
Diversification Opportunities for Archer and Western Energy
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Archer and Western is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Archer Limited and Western Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Energy Services and Archer 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 Archer Limited are associated (or correlated) with Western Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Energy Services has no effect on the direction of Archer i.e., Archer and Western Energy go up and down completely randomly.
Pair Corralation between Archer and Western Energy
Assuming the 90 days horizon Archer Limited is expected to generate 0.48 times more return on investment than Western Energy. However, Archer Limited is 2.1 times less risky than Western Energy. It trades about -0.09 of its potential returns per unit of risk. Western Energy Services is currently generating about -0.09 per unit of risk. If you would invest 220.00 in Archer Limited on August 29, 2024 and sell it today you would lose (10.00) from holding Archer Limited or give up 4.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Archer Limited vs. Western Energy Services
Performance |
| Timeline |
| Archer Limited |
| Western Energy Services |
Archer and Western Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Archer and Western Energy
The main advantage of trading using opposite Archer and Western Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer position performs unexpectedly, Western Energy 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 Western Energy will offset losses from the drop in Western Energy's long position.| Archer vs. PHX Energy Services | Archer vs. Cathedral Energy Services | Archer vs. AKITA Drilling | Archer vs. Noble plc |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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