Correlation Between USA Compression and Archrock

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

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

Diversification Opportunities for USA Compression and Archrock

0.46

Correlation Coefficient

USA Compression  Archrock

Very weak diversification

The 3 months correlation between USA and Archrock is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding USA Compression Partners and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and USA Compression 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 USA Compression Partners 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 USA Compression i.e., USA Compression and Archrock go up and down completely randomly.

Pair Corralation between USA Compression and Archrock

Given the investment horizon of 90 days USA Compression Partners is expected to generate 0.78 times more return on investment than Archrock. However, USA Compression Partners is 1.28 times less risky than Archrock. It trades about 0.15 of its potential returns per unit of risk. Archrock is currently generating about 0.06 per unit of risk. If you would invest  2,222  in USA Compression Partners on December 27, 2024 and sell it today you would earn a total of  481.00  from holding USA Compression Partners or generate 21.65% return on investment over 90 days.

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

USA Compression Partners  vs.  Archrock

USA Compression Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USA Compression Partners are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, USA Compression exhibited solid returns over the last few months and may actually be approaching a breakup point.

Archrock

Risk-Adjusted Performance

Modest

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 USA Compression and Archrock

The main advantage of trading using opposite USA Compression and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USA Compression 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 USA Compression Partners 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.