Correlation Between Black Hills and Archrock

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

By analyzing existing cross correlation between Black Hills and Archrock, you can compare the effects of market volatilities on Black Hills 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 Black Hills with a short position of Archrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and Archrock.

Diversification Opportunities for Black Hills and Archrock

-0.09

Correlation Coefficient

Black Hills  Archrock

Good diversification

The 3 months correlation between Black and Archrock is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Black Hills 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 Black Hills 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 Black Hills i.e., Black Hills and Archrock go up and down completely randomly.

Pair Corralation between Black Hills and Archrock

Considering the 90-day investment horizon Black Hills is expected to generate 0.3 times more return on investment than Archrock. However, Black Hills is 3.29 times less risky than Archrock. It trades about -0.16 of its potential returns per unit of risk. Archrock is currently generating about -0.1 per unit of risk. If you would invest  6,135  in Black Hills on January 14, 2025 and sell it today you would lose (299.00) from holding Black Hills or give up 4.87% of portfolio value over 90 days.

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

Black Hills  vs.  Archrock

Black Hills

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Black Hills and Archrock

The main advantage of trading using opposite Black Hills and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills 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.

The idea behind Black Hills and Archrock 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.