Correlation Between NOV and Archrock

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

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

Diversification Opportunities for NOV and Archrock

0.55

Correlation Coefficient

NOV  Archrock

Very weak diversification

The 3 months correlation between NOV and Archrock is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and NOV 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 NOV Inc 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 NOV i.e., NOV and Archrock go up and down completely randomly.

Pair Corralation between NOV and Archrock

Considering the 90-day investment horizon NOV is expected to generate 1.4 times less return on investment than Archrock. But when comparing it to its historical volatility, NOV Inc is 1.16 times less risky than Archrock. It trades about 0.06 of its potential returns per unit of risk. Archrock is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,437  in Archrock on December 27, 2024 and sell it today you would earn a total of  249.00  from holding Archrock or generate 10.22% return on investment over 90 days.

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

NOV Inc  vs.  Archrock

NOV Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, NOV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NOV and Archrock

The main advantage of trading using opposite NOV and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOV 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 NOV Inc 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 Anywhere module to track or share privately all of your investments from the convenience of any device.