Correlation Between Archrock and Cactus
Can any of the company-specific risk be diversified away by investing in both Archrock and Cactus 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 Cactus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Archrock and Cactus Inc, you can compare the effects of market volatilities on Archrock and Cactus 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 Cactus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archrock and Cactus.
Diversification Opportunities for Archrock and Cactus
Almost no diversification
The 3 months correlation between Archrock and Cactus is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Archrock and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc 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 Cactus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cactus Inc has no effect on the direction of Archrock i.e., Archrock and Cactus go up and down completely randomly.
Pair Corralation between Archrock and Cactus
Given the investment horizon of 90 days Archrock is expected to generate 1.01 times more return on investment than Cactus. However, Archrock is 1.01 times more volatile than Cactus Inc. It trades about 0.37 of its potential returns per unit of risk. Cactus Inc is currently generating about 0.28 per unit of risk. If you would invest 2,031 in Archrock on August 27, 2024 and sell it today you would earn a total of 555.00 from holding Archrock or generate 27.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Archrock vs. Cactus Inc
Performance |
| Timeline |
| Archrock |
| Cactus Inc |
Archrock and Cactus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Archrock and Cactus
The main advantage of trading using opposite Archrock and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archrock position performs unexpectedly, Cactus 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 Cactus will offset losses from the drop in Cactus' long position.| Archrock vs. ProPetro Holding Corp | Archrock vs. Select Energy Services | Archrock vs. USA Compression Partners | Archrock vs. Par Pacific Holdings |
| Cactus vs. ChampionX | Cactus vs. Expro Group Holdings | Cactus vs. Ranger Energy Services | Cactus vs. MRC Global |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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