Correlation Between Western Energy and Archer
Can any of the company-specific risk be diversified away by investing in both Western Energy and Archer 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 Western Energy and Archer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Energy Services and Archer Limited, you can compare the effects of market volatilities on Western Energy and Archer 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 Western Energy with a short position of Archer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Energy and Archer.
Diversification Opportunities for Western Energy and Archer
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Archer is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Western Energy Services and Archer Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Limited and Western Energy 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 Western Energy Services are associated (or correlated) with Archer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Limited has no effect on the direction of Western Energy i.e., Western Energy and Archer go up and down completely randomly.
Pair Corralation between Western Energy and Archer
Assuming the 90 days horizon Western Energy Services is expected to generate 1.49 times more return on investment than Archer. However, Western Energy is 1.49 times more volatile than Archer Limited. It trades about -0.03 of its potential returns per unit of risk. Archer Limited is currently generating about -0.16 per unit of risk. If you would invest 196.00 in Western Energy Services on August 29, 2024 and sell it today you would lose (3.00) from holding Western Energy Services or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Energy Services vs. Archer Limited
Performance |
| Timeline |
| Western Energy Services |
| Archer Limited |
Western Energy and Archer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Energy and Archer
The main advantage of trading using opposite Western Energy and Archer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Energy position performs unexpectedly, Archer 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 Archer will offset losses from the drop in Archer's long position.| Western Energy vs. Petroleo Brasileiro Petrobras | Western Energy vs. Equinor ASA ADR | Western Energy vs. Eni SpA ADR | Western Energy vs. YPF Sociedad Anonima |
| Archer vs. PHX Energy Services | Archer vs. Cathedral Energy Services | Archer vs. AKITA Drilling | Archer vs. Noble plc |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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