Correlation Between PrimeEnergy and GeoPark
Can any of the company-specific risk be diversified away by investing in both PrimeEnergy and GeoPark 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 PrimeEnergy and GeoPark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PrimeEnergy and GeoPark, you can compare the effects of market volatilities on PrimeEnergy and GeoPark 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 PrimeEnergy with a short position of GeoPark. Check out your portfolio center. Please also check ongoing floating volatility patterns of PrimeEnergy and GeoPark.
Diversification Opportunities for PrimeEnergy and GeoPark
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between PrimeEnergy and GeoPark is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PrimeEnergy and GeoPark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoPark and PrimeEnergy 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 PrimeEnergy are associated (or correlated) with GeoPark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoPark has no effect on the direction of PrimeEnergy i.e., PrimeEnergy and GeoPark go up and down completely randomly.
Pair Corralation between PrimeEnergy and GeoPark
Given the investment horizon of 90 days PrimeEnergy is expected to generate 1.01 times more return on investment than GeoPark. However, PrimeEnergy is 1.01 times more volatile than GeoPark. It trades about 0.09 of its potential returns per unit of risk. GeoPark is currently generating about -0.02 per unit of risk. If you would invest 7,607 in PrimeEnergy on August 29, 2024 and sell it today you would earn a total of 12,852 from holding PrimeEnergy or generate 168.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
PrimeEnergy vs. GeoPark
Performance |
| Timeline |
| PrimeEnergy |
| GeoPark |
PrimeEnergy and GeoPark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PrimeEnergy and GeoPark
The main advantage of trading using opposite PrimeEnergy and GeoPark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PrimeEnergy position performs unexpectedly, GeoPark 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 GeoPark will offset losses from the drop in GeoPark's long position.| PrimeEnergy vs. Epsilon Energy | PrimeEnergy vs. Crescent Energy Co | PrimeEnergy vs. Evolution Petroleum | PrimeEnergy vs. MorningStar Partners, LP |
| GeoPark vs. ConocoPhillips | GeoPark vs. Occidental Petroleum | GeoPark vs. EOG Resources | GeoPark vs. Coterra Energy |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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