Correlation Between GeoPark and North European
Can any of the company-specific risk be diversified away by investing in both GeoPark and North European 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 GeoPark and North European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GeoPark and North European Oil, you can compare the effects of market volatilities on GeoPark and North European 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 GeoPark with a short position of North European. Check out your portfolio center. Please also check ongoing floating volatility patterns of GeoPark and North European.
Diversification Opportunities for GeoPark and North European
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GeoPark and North is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and North European Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North European Oil and GeoPark 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 GeoPark are associated (or correlated) with North European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North European Oil has no effect on the direction of GeoPark i.e., GeoPark and North European go up and down completely randomly.
Pair Corralation between GeoPark and North European
Given the investment horizon of 90 days GeoPark is expected to generate 0.63 times more return on investment than North European. However, GeoPark is 1.59 times less risky than North European. It trades about -0.02 of its potential returns per unit of risk. North European Oil is currently generating about -0.04 per unit of risk. If you would invest 1,242 in GeoPark on August 24, 2024 and sell it today you would lose (415.00) from holding GeoPark or give up 33.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GeoPark vs. North European Oil
Performance |
| Timeline |
| GeoPark |
| North European Oil |
GeoPark and North European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GeoPark and North European
The main advantage of trading using opposite GeoPark and North European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GeoPark position performs unexpectedly, North European 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 North European will offset losses from the drop in North European's long position.| GeoPark vs. Evolution Petroleum | GeoPark vs. Granite Ridge Resources | GeoPark vs. PHX Minerals | GeoPark vs. California Resources Corp |
| North European vs. Cross Timbers Royalty | North European vs. VOC Energy Trust | North European vs. Sabine Royalty Trust | North European vs. Permianville Royalty Trust |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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