Correlation Between Archrock and Enerflex

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

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

Diversification Opportunities for Archrock and Enerflex

0.49

Correlation Coefficient

Archrock  Enerflex

Very weak diversification

The 3 months correlation between Archrock and Enerflex is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Archrock and Enerflex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerflex 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 Enerflex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerflex has no effect on the direction of Archrock i.e., Archrock and Enerflex go up and down completely randomly.

Pair Corralation between Archrock and Enerflex

Given the investment horizon of 90 days Archrock is expected to generate 1.21 times more return on investment than Enerflex. However, Archrock is 1.21 times more volatile than Enerflex. It trades about 0.05 of its potential returns per unit of risk. Enerflex is currently generating about -0.16 per unit of risk. If you would invest  2,472  in Archrock on December 30, 2024 and sell it today you would earn a total of  172.00  from holding Archrock or generate 6.96% return on investment over 90 days.

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

Archrock  vs.  Enerflex

Archrock

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Archrock may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Enerflex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enerflex 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Archrock and Enerflex

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

The idea behind Archrock and Enerflex 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.