Correlation Between Archrock and Atmos Energy

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

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

Diversification Opportunities for Archrock and Atmos Energy

0.51

Correlation Coefficient

Archrock  Atmos Energy

Very weak diversification

The 3 months correlation between Archrock and Atmos is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Archrock and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Archrock i.e., Archrock and Atmos Energy go up and down completely randomly.

Pair Corralation between Archrock and Atmos Energy

Given the investment horizon of 90 days Archrock is expected to generate 2.69 times more return on investment than Atmos Energy. However, Archrock is 2.69 times more volatile than Atmos Energy. It trades about 0.09 of its potential returns per unit of risk. Atmos Energy is currently generating about 0.19 per unit of risk. If you would invest  1,994  in Archrock on October 4, 2024 and sell it today you would earn a total of  530.00  from holding Archrock or generate 26.58% return on investment over 90 days.

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

Archrock  vs.  Atmos Energy

Archrock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Archrock exhibited solid returns over the last few months and may actually be approaching a breakup point.

Atmos Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Archrock and Atmos Energy

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

The idea behind Archrock and Atmos Energy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.