Correlation Between Liberty Oilfield and Archrock

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

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

Diversification Opportunities for Liberty Oilfield and Archrock

0.49

Correlation Coefficient

Liberty Oilfield  Archrock

Very weak diversification

The 3 months correlation between Liberty and Archrock is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Oilfield Services and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Liberty Oilfield 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 Liberty Oilfield 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 Liberty Oilfield i.e., Liberty Oilfield and Archrock go up and down completely randomly.

Pair Corralation between Liberty Oilfield and Archrock

Given the investment horizon of 90 days Liberty Oilfield Services is expected to under-perform the Archrock. But the stock apears to be less risky and, when comparing its historical volatility, Liberty Oilfield Services is 1.01 times less risky than Archrock. The stock trades about -0.09 of its potential returns per unit of risk. The Archrock is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,472  in Archrock on December 29, 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

Liberty Oilfield Services  vs.  Archrock

Liberty Oilfield Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Oilfield Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Liberty Oilfield and Archrock

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

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.