Correlation Between Key Energy and Archrock

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

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

Diversification Opportunities for Key Energy and Archrock

0.07

Correlation Coefficient

Key Energy  Archrock

Significant diversification

The 3 months correlation between Key and Archrock is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Key Energy Services and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Key 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 Key Energy Services 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 Key Energy i.e., Key Energy and Archrock go up and down completely randomly.

Pair Corralation between Key Energy and Archrock

If you would invest  2,284  in Archrock on October 7, 2024 and sell it today you would earn a total of  316.00  from holding Archrock or generate 13.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	2.44%
Values	Daily Returns

Key Energy Services  vs.  Archrock

Key Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Key Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Archrock

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Archrock exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Key Energy and Archrock

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

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.