Correlation Between Archrock and Ranger Energy

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

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

Diversification Opportunities for Archrock and Ranger Energy

0.92

Correlation Coefficient

Archrock  Ranger Energy

Almost no diversification

The 3 months correlation between Archrock and Ranger is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Archrock and Ranger Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ranger Energy Services 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 Ranger Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ranger Energy Services has no effect on the direction of Archrock i.e., Archrock and Ranger Energy go up and down completely randomly.

Pair Corralation between Archrock and Ranger Energy

Given the investment horizon of 90 days Archrock is expected to generate 1.33 times more return on investment than Ranger Energy. However, Archrock is 1.33 times more volatile than Ranger Energy Services. It trades about 0.22 of its potential returns per unit of risk. Ranger Energy Services is currently generating about 0.28 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 Strong
Accuracy	100.0%
Values	Daily Returns

Archrock  vs.  Ranger Energy Services

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.

Ranger Energy Services

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ranger Energy Services are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Ranger Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Archrock and Ranger Energy

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

The idea behind Archrock and Ranger Energy Services 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.