Correlation Between Archrock and ProPetro Holding

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

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

Diversification Opportunities for Archrock and ProPetro Holding

0.55

Correlation Coefficient

Archrock  ProPetro Holding

Very weak diversification

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

Pair Corralation between Archrock and ProPetro Holding

Given the investment horizon of 90 days Archrock is expected to generate 0.98 times more return on investment than ProPetro Holding. However, Archrock is 1.02 times less risky than ProPetro Holding. It trades about 0.05 of its potential returns per unit of risk. ProPetro Holding Corp is currently generating about -0.11 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.  ProPetro Holding Corp

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.

ProPetro Holding Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProPetro Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Archrock and ProPetro Holding

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

The idea behind Archrock and ProPetro Holding Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.