Correlation Between Archrock and Now

Can any of the company-specific risk be diversified away by investing in both Archrock and Now 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 Now into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Archrock and Now Inc, you can compare the effects of market volatilities on Archrock and Now 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 Now. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archrock and Now.

Diversification Opportunities for Archrock and Now

0.09

Correlation Coefficient

Archrock  Now

Significant diversification

The 3 months correlation between Archrock and Now is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Archrock and Now Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now 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 Now. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Inc has no effect on the direction of Archrock i.e., Archrock and Now go up and down completely randomly.

Pair Corralation between Archrock and Now

Given the investment horizon of 90 days Archrock is expected to generate 1.11 times more return on investment than Now. However, Archrock is 1.11 times more volatile than Now Inc. It trades about -0.01 of its potential returns per unit of risk. Now Inc is currently generating about -0.36 per unit of risk. If you would invest  2,024  in Archrock on August 1, 2024 and sell it today you would lose (9.00) from holding Archrock or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Archrock  vs.  Now Inc

Archrock

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Archrock is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Now Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Now Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in November 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Archrock and Now

The main advantage of trading using opposite Archrock and Now positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archrock position performs unexpectedly, Now 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 Now will offset losses from the drop in Now's long position.

The idea behind Archrock and Now Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.