Correlation Between Atmos Energy and Archrock

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

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

Diversification Opportunities for Atmos Energy and Archrock

0.51

Correlation Coefficient

Atmos Energy  Archrock

Very weak diversification

The 3 months correlation between Atmos and Archrock is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Atmos Energy and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Atmos Energy 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 Atmos Energy 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 Atmos Energy i.e., Atmos Energy and Archrock go up and down completely randomly.

Pair Corralation between Atmos Energy and Archrock

Considering the 90-day investment horizon Atmos Energy is expected to generate 1.26 times less return on investment than Archrock. But when comparing it to its historical volatility, Atmos Energy is 2.69 times less risky than Archrock. It trades about 0.19 of its potential returns per unit of risk. Archrock is currently generating about 0.09 of returns per unit of risk over similar time horizon. 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

Atmos Energy  vs.  Archrock

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.

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.

Pair Trading with Atmos Energy and Archrock

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

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.