Correlation Between Select Energy and Archrock
Can any of the company-specific risk be diversified away by investing in both Select Energy and Archrock 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 Select Energy and Archrock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Energy Services and Archrock, you can compare the effects of market volatilities on Select Energy and Archrock 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 Select Energy with a short position of Archrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Energy and Archrock.
Diversification Opportunities for Select Energy and Archrock
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Select and Archrock is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Select Energy Services and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Select 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 Select Energy Services are associated (or correlated) with Archrock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archrock has no effect on the direction of Select Energy i.e., Select Energy and Archrock go up and down completely randomly.
Pair Corralation between Select Energy and Archrock
Given the investment horizon of 90 days Select Energy Services is expected to generate 1.84 times more return on investment than Archrock. However, Select Energy is 1.84 times more volatile than Archrock. It trades about 0.26 of its potential returns per unit of risk. Archrock is currently generating about 0.37 per unit of risk. If you would invest 1,072 in Select Energy Services on August 24, 2024 and sell it today you would earn a total of 386.00 from holding Select Energy Services or generate 36.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Energy Services vs. Archrock
Performance |
| Timeline |
| Select Energy Services |
| Archrock |
Select Energy and Archrock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Energy and Archrock
The main advantage of trading using opposite Select Energy and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Energy position performs unexpectedly, Archrock 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 Archrock will offset losses from the drop in Archrock's long position.| Select Energy vs. Orion Engineered Carbons | Select Energy vs. Element Solutions | Select Energy vs. Kronos Worldwide | Select Energy vs. FutureFuel Corp |
| Archrock vs. ProPetro Holding Corp | Archrock vs. Select Energy Services | Archrock vs. Par Pacific Holdings | Archrock 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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