Correlation Between Archrock and Natural Gas
Can any of the company-specific risk be diversified away by investing in both Archrock and Natural Gas 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 Archrock and Natural Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Archrock and Natural Gas Services, you can compare the effects of market volatilities on Archrock and Natural Gas 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 Archrock with a short position of Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archrock and Natural Gas.
Diversification Opportunities for Archrock and Natural Gas
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Archrock and Natural is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Archrock and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services and Archrock 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 Archrock are associated (or correlated) with Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of Archrock i.e., Archrock and Natural Gas go up and down completely randomly.
Pair Corralation between Archrock and Natural Gas
Given the investment horizon of 90 days Archrock is expected to generate 0.74 times more return on investment than Natural Gas. However, Archrock is 1.35 times less risky than Natural Gas. It trades about 0.13 of its potential returns per unit of risk. Natural Gas Services is currently generating about 0.09 per unit of risk. If you would invest 1,356 in Archrock on August 24, 2024 and sell it today you would earn a total of 1,229 from holding Archrock or generate 90.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Archrock vs. Natural Gas Services
Performance |
| Timeline |
| Archrock |
| Natural Gas Services |
Archrock and Natural Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Archrock and Natural Gas
The main advantage of trading using opposite Archrock and Natural Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archrock position performs unexpectedly, Natural Gas 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 Natural Gas will offset losses from the drop in Natural Gas' long position.| Archrock vs. ProPetro Holding Corp | Archrock vs. Select Energy Services | Archrock vs. USA Compression Partners | Archrock vs. Par Pacific Holdings |
| Natural Gas vs. Enerflex | Natural Gas vs. Forum Energy Technologies | Natural Gas vs. Archrock | Natural Gas vs. Geospace Technologies |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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