Correlation Between Dawson Geophysical and Archrock

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

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

Diversification Opportunities for Dawson Geophysical and Archrock

-0.05

Correlation Coefficient

Dawson Geophysical  Archrock

Good diversification

The 3 months correlation between Dawson and Archrock is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dawson Geophysical and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Dawson Geophysical 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 Dawson Geophysical 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 Dawson Geophysical i.e., Dawson Geophysical and Archrock go up and down completely randomly.

Pair Corralation between Dawson Geophysical and Archrock

Given the investment horizon of 90 days Dawson Geophysical is expected to generate 5.19 times less return on investment than Archrock. In addition to that, Dawson Geophysical is 1.3 times more volatile than Archrock. It trades about 0.01 of its total potential returns per unit of risk. Archrock is currently generating about 0.07 per unit of volatility. If you would invest  2,436  in Archrock on December 21, 2024 and sell it today you would earn a total of  233.00  from holding Archrock or generate 9.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Dawson Geophysical  vs.  Archrock

Dawson Geophysical

Risk-Adjusted Performance

Very Weak

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

Archrock

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 5 (%) 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.

Pair Trading with Dawson Geophysical and Archrock

The main advantage of trading using opposite Dawson Geophysical and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dawson Geophysical 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 Dawson Geophysical 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.