Correlation Between Velodyne Lidar and Archrock

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Can any of the company-specific risk be diversified away by investing in both Velodyne Lidar 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 Velodyne Lidar and Archrock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Velodyne Lidar and Archrock, you can compare the effects of market volatilities on Velodyne Lidar 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 Velodyne Lidar with a short position of Archrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Velodyne Lidar and Archrock.

Diversification Opportunities for Velodyne Lidar and Archrock

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Velodyne and Archrock is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Velodyne Lidar and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Velodyne Lidar 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 Velodyne Lidar 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 Velodyne Lidar i.e., Velodyne Lidar and Archrock go up and down completely randomly.

Pair Corralation between Velodyne Lidar and Archrock

Given the investment horizon of 90 days Velodyne Lidar is expected to under-perform the Archrock. In addition to that, Velodyne Lidar is 1.53 times more volatile than Archrock. It trades about -0.06 of its total potential returns per unit of risk. Archrock is currently generating about -0.02 per unit of volatility. If you would invest  728.00  in Archrock on July 7, 2022 and sell it today you would lose (16.00)  from holding Archrock or give up 2.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Velodyne Lidar  vs.  Archrock

 Performance (%) 
       Timeline  
Velodyne Lidar 
Velodyne Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Velodyne Lidar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Velodyne Lidar reported solid returns over the last few months and may actually be approaching a breakup point.

Velodyne Price Channel

Archrock 
Archrock Performance
0 of 100
Over the last 90 days Archrock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Archrock Price Channel

Velodyne Lidar and Archrock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Velodyne Lidar and Archrock

The main advantage of trading using opposite Velodyne Lidar and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Velodyne Lidar 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.
Velodyne Lidar vs. Amazon Inc
The idea behind Velodyne Lidar 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.
Archrock vs. Amazon Inc
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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