Correlation Between GeoPark and San Juan
Can any of the company-specific risk be diversified away by investing in both GeoPark and San Juan 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 San Juan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GeoPark and San Juan Basin, you can compare the effects of market volatilities on GeoPark and San Juan 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 San Juan. Check out your portfolio center. Please also check ongoing floating volatility patterns of GeoPark and San Juan.
Diversification Opportunities for GeoPark and San Juan
Modest diversification
The 3 months correlation between GeoPark and San is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and San Juan Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Juan Basin 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 San Juan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Juan Basin has no effect on the direction of GeoPark i.e., GeoPark and San Juan go up and down completely randomly.
Pair Corralation between GeoPark and San Juan
Given the investment horizon of 90 days GeoPark is expected to generate 1.01 times less return on investment than San Juan. But when comparing it to its historical volatility, GeoPark is 1.06 times less risky than San Juan. It trades about 0.17 of its potential returns per unit of risk. San Juan Basin is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 407.00 in San Juan Basin on August 31, 2024 and sell it today you would earn a total of 44.00 from holding San Juan Basin or generate 10.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GeoPark vs. San Juan Basin
Performance |
| Timeline |
| GeoPark |
| San Juan Basin |
GeoPark and San Juan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GeoPark and San Juan
The main advantage of trading using opposite GeoPark and San Juan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GeoPark position performs unexpectedly, San Juan 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 San Juan will offset losses from the drop in San Juan's long position.| GeoPark vs. Evolution Petroleum | GeoPark vs. Granite Ridge Resources | GeoPark vs. PHX Minerals | GeoPark vs. California Resources Corp |
| San Juan vs. Sabine Royalty Trust | San Juan vs. Permian Basin Royalty | San Juan vs. Cross Timbers Royalty | San Juan vs. Mesa 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |