Correlation Between PGE Corp and Archrock

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

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

Diversification Opportunities for PGE Corp and Archrock

0.78

Correlation Coefficient

PGE Corp  Archrock

Poor diversification

The 3 months correlation between PGE and Archrock is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and PGE Corp 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 PGE Corp 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 PGE Corp i.e., PGE Corp and Archrock go up and down completely randomly.

Pair Corralation between PGE Corp and Archrock

Considering the 90-day investment horizon PGE Corp is expected to generate 29.38 times less return on investment than Archrock. But when comparing it to its historical volatility, PGE Corp is 1.94 times less risky than Archrock. It trades about 0.01 of its potential returns per unit of risk. Archrock is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,882  in Archrock on September 4, 2024 and sell it today you would earn a total of  657.00  from holding Archrock or generate 34.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

PGE Corp  vs.  Archrock

PGE Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PGE Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, PGE Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Archrock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 16 (%) 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 PGE Corp and Archrock

The main advantage of trading using opposite PGE Corp and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE Corp 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 PGE Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.