Correlation Between Shelf Drilling and Archer

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

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

Diversification Opportunities for Shelf Drilling and Archer

-0.2

Correlation Coefficient

Shelf Drilling  Archer

Good diversification

The 3 months correlation between Shelf and Archer is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Shelf Drilling and Archer Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Limited and Shelf Drilling 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 Shelf Drilling are associated (or correlated) with Archer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Limited has no effect on the direction of Shelf Drilling i.e., Shelf Drilling and Archer go up and down completely randomly.

Pair Corralation between Shelf Drilling and Archer

Assuming the 90 days trading horizon Shelf Drilling is expected to under-perform the Archer. In addition to that, Shelf Drilling is 1.69 times more volatile than Archer Limited. It trades about -0.07 of its total potential returns per unit of risk. Archer Limited is currently generating about 0.38 per unit of volatility. If you would invest  2,323  in Archer Limited on October 11, 2024 and sell it today you would earn a total of  373.00  from holding Archer Limited or generate 16.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Shelf Drilling  vs.  Archer Limited

Shelf Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shelf Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Archer Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Archer disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shelf Drilling and Archer

The main advantage of trading using opposite Shelf Drilling and Archer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shelf Drilling position performs unexpectedly, Archer 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 Archer will offset losses from the drop in Archer's long position.

The idea behind Shelf Drilling and Archer Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.