Correlation Between 26442UAA2 and Archrock

Can any of the company-specific risk be diversified away by investing in both 26442UAA2 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 26442UAA2 and Archrock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DUKE ENERGY PROGRESS and Archrock, you can compare the effects of market volatilities on 26442UAA2 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 26442UAA2 with a short position of Archrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of 26442UAA2 and Archrock.

Diversification Opportunities for 26442UAA2 and Archrock

-0.26

Correlation Coefficient

26442UAA2  Archrock

Very good diversification

The 3 months correlation between 26442UAA2 and Archrock is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding DUKE ENERGY PROGRESS and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and 26442UAA2 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 DUKE ENERGY PROGRESS 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 26442UAA2 i.e., 26442UAA2 and Archrock go up and down completely randomly.

Pair Corralation between 26442UAA2 and Archrock

Assuming the 90 days trading horizon 26442UAA2 is expected to generate 4.86 times less return on investment than Archrock. But when comparing it to its historical volatility, DUKE ENERGY PROGRESS is 19.5 times less risky than Archrock. It trades about 0.23 of its potential returns per unit of risk. Archrock is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,532  in Archrock on October 8, 2024 and sell it today you would earn a total of  54.00  from holding Archrock or generate 2.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

DUKE ENERGY PROGRESS  vs.  Archrock

DUKE ENERGY PROGRESS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DUKE ENERGY PROGRESS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 26442UAA2 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

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 11 (%) 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 26442UAA2 and Archrock

The main advantage of trading using opposite 26442UAA2 and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 26442UAA2 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 DUKE ENERGY PROGRESS 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.