Correlation Between GeoPark and Vista Oil
Can any of the company-specific risk be diversified away by investing in both GeoPark and Vista Oil 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 Vista Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GeoPark and Vista Oil Gas, you can compare the effects of market volatilities on GeoPark and Vista Oil 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 Vista Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of GeoPark and Vista Oil.
Diversification Opportunities for GeoPark and Vista Oil
Poor diversification
The 3 months correlation between GeoPark and Vista is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and Vista Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vista Oil Gas 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 Vista Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vista Oil Gas has no effect on the direction of GeoPark i.e., GeoPark and Vista Oil go up and down completely randomly.
Pair Corralation between GeoPark and Vista Oil
Given the investment horizon of 90 days GeoPark is expected to generate 1.0 times more return on investment than Vista Oil. However, GeoPark is 1.0 times less risky than Vista Oil. It trades about 0.09 of its potential returns per unit of risk. Vista Oil Gas is currently generating about 0.06 per unit of risk. If you would invest 839.00 in GeoPark on September 2, 2024 and sell it today you would earn a total of 131.00 from holding GeoPark or generate 15.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GeoPark vs. Vista Oil Gas
Performance |
| Timeline |
| GeoPark |
| Vista Oil Gas |
GeoPark and Vista Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GeoPark and Vista Oil
The main advantage of trading using opposite GeoPark and Vista Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GeoPark position performs unexpectedly, Vista Oil 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 Vista Oil will offset losses from the drop in Vista Oil's long position.| GeoPark vs. Evolution Petroleum | GeoPark vs. Granite Ridge Resources | GeoPark vs. PHX Minerals | GeoPark vs. California Resources Corp |
| Vista Oil vs. Battalion Oil Corp | Vista Oil vs. Evolution Petroleum | Vista Oil vs. GeoPark | Vista Oil vs. Antero Resources Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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