Correlation Between Enerflex and Archrock

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

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

Diversification Opportunities for Enerflex and Archrock

0.36

Correlation Coefficient

Enerflex  Archrock

Weak diversification

The 3 months correlation between Enerflex and Archrock is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Enerflex and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Enerflex 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 Enerflex 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 Enerflex i.e., Enerflex and Archrock go up and down completely randomly.

Pair Corralation between Enerflex and Archrock

Given the investment horizon of 90 days Enerflex is expected to under-perform the Archrock. But the stock apears to be less risky and, when comparing its historical volatility, Enerflex is 1.51 times less risky than Archrock. The stock trades about -0.43 of its potential returns per unit of risk. The Archrock is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,671  in Archrock on November 28, 2024 and sell it today you would lose (9.00) from holding Archrock or give up 0.34% of portfolio value over 90 days.

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

Enerflex  vs.  Archrock

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Archrock

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 3 (%) 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 March 2025.

Pair Trading with Enerflex and Archrock

The main advantage of trading using opposite Enerflex and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enerflex 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 Enerflex 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.