Correlation Between Archrock and Smith Nephew
Can any of the company-specific risk be diversified away by investing in both Archrock and Smith Nephew 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 Smith Nephew into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Archrock and Smith Nephew plc, you can compare the effects of market volatilities on Archrock and Smith Nephew 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 Smith Nephew. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archrock and Smith Nephew.
Diversification Opportunities for Archrock and Smith Nephew
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Archrock and Smith is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Archrock and Smith Nephew plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew plc 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 Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew plc has no effect on the direction of Archrock i.e., Archrock and Smith Nephew go up and down completely randomly.
Pair Corralation between Archrock and Smith Nephew
Given the investment horizon of 90 days Archrock is expected to generate 0.95 times more return on investment than Smith Nephew. However, Archrock is 1.05 times less risky than Smith Nephew. It trades about 0.23 of its potential returns per unit of risk. Smith Nephew plc is currently generating about -0.04 per unit of risk. If you would invest 2,002 in Archrock on November 2, 2024 and sell it today you would earn a total of 997.00 from holding Archrock or generate 49.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.33% |
| Values | Daily Returns |
Archrock vs. Smith Nephew plc
Performance |
| Timeline |
| Archrock |
| Smith Nephew plc |
Archrock and Smith Nephew Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Archrock and Smith Nephew
The main advantage of trading using opposite Archrock and Smith Nephew positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archrock position performs unexpectedly, Smith Nephew 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 Smith Nephew will offset losses from the drop in Smith Nephew's long position.| Archrock vs. ProPetro Holding Corp | Archrock vs. Select Energy Services | Archrock vs. USA Compression Partners | Archrock vs. Par Pacific Holdings |
| Smith Nephew vs. Sonova Holding AG | Smith Nephew vs. Medtronic PLC | Smith Nephew vs. CONMED | Smith Nephew vs. Glaukos Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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