Correlation Between Archrock and Pure Cycle

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

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

Diversification Opportunities for Archrock and Pure Cycle

0.55

Correlation Coefficient

Archrock  Pure Cycle

Very weak diversification

The 3 months correlation between Archrock and Pure is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Archrock and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle 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 Pure Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Cycle has no effect on the direction of Archrock i.e., Archrock and Pure Cycle go up and down completely randomly.

Pair Corralation between Archrock and Pure Cycle

Given the investment horizon of 90 days Archrock is expected to generate 0.87 times more return on investment than Pure Cycle. However, Archrock is 1.15 times less risky than Pure Cycle. It trades about -0.01 of its potential returns per unit of risk. Pure Cycle is currently generating about -0.05 per unit of risk. If you would invest  2,372  in Archrock on May 4, 2025 and sell it today you would lose (35.00) from holding Archrock or give up 1.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.94%
Values	Daily Returns

Archrock  vs.  Pure Cycle

Archrock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Archrock has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pure Cycle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pure Cycle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Pure Cycle is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Archrock and Pure Cycle

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

The idea behind Archrock and Pure Cycle 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.