Correlation Between Archrock and Amplify Energy

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

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

Diversification Opportunities for Archrock and Amplify Energy

0.29

Correlation Coefficient

Archrock  Amplify Energy

Modest diversification

The 3 months correlation between Archrock and Amplify is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Archrock and Amplify Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amplify Energy Corp and Archrock 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 Archrock are associated (or correlated) with Amplify Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amplify Energy Corp has no effect on the direction of Archrock i.e., Archrock and Amplify Energy go up and down completely randomly.

Pair Corralation between Archrock and Amplify Energy

Given the investment horizon of 90 days Archrock is expected to generate 1.06 times more return on investment than Amplify Energy. However, Archrock is 1.06 times more volatile than Amplify Energy Corp. It trades about 0.22 of its potential returns per unit of risk. Amplify Energy Corp is currently generating about 0.01 per unit of risk. If you would invest  1,889  in Archrock on September 2, 2024 and sell it today you would earn a total of  673.00  from holding Archrock or generate 35.63% return on investment over 90 days.

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

Archrock  vs.  Amplify Energy Corp

Archrock

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Archrock exhibited solid returns over the last few months and may actually be approaching a breakup point.

Amplify Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amplify Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Amplify Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Archrock and Amplify Energy

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

The idea behind Archrock and Amplify Energy Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.