Correlation Between Cactus and Archrock

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

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

Diversification Opportunities for Cactus and Archrock

0.32

Correlation Coefficient

Cactus  Archrock

Weak diversification

The 3 months correlation between Cactus and Archrock is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Cactus 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 Cactus 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 Cactus i.e., Cactus and Archrock go up and down completely randomly.

Pair Corralation between Cactus and Archrock

Considering the 90-day investment horizon Cactus is expected to generate 1.91 times less return on investment than Archrock. But when comparing it to its historical volatility, Cactus Inc is 1.2 times less risky than Archrock. It trades about 0.37 of its potential returns per unit of risk. Archrock is currently generating about 0.59 of returns per unit of risk over similar time horizon. If you would invest  2,403  in Archrock on October 20, 2024 and sell it today you would earn a total of  570.00  from holding Archrock or generate 23.72% return on investment over 90 days.

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

Cactus Inc  vs.  Archrock

Cactus Inc

Risk-Adjusted Performance

4 of 100

Insignificant

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

Archrock

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 19 (%) 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 Cactus and Archrock

The main advantage of trading using opposite Cactus and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cactus 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 Cactus 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 CEOs Directory module to screen CEOs from public companies around the world.