Correlation Between ProPetro Holding and Archrock

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

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

Diversification Opportunities for ProPetro Holding and Archrock

0.55

Correlation Coefficient

ProPetro Holding  Archrock

Very weak diversification

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

Pair Corralation between ProPetro Holding and Archrock

Given the investment horizon of 90 days ProPetro Holding Corp is expected to under-perform the Archrock. In addition to that, ProPetro Holding is 1.02 times more volatile than Archrock. It trades about -0.11 of its total potential returns per unit of risk. Archrock is currently generating about 0.05 per unit of volatility. If you would invest  2,472  in Archrock on December 30, 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

ProPetro Holding Corp  vs.  Archrock

ProPetro Holding Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProPetro Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 ProPetro Holding and Archrock

The main advantage of trading using opposite ProPetro Holding and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProPetro Holding 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 ProPetro Holding Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.