Correlation Between Bakken Water and Geospace Technologies

Can any of the company-specific risk be diversified away by investing in both Bakken Water and Geospace Technologies 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 Bakken Water and Geospace Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bakken Water Transfer and Geospace Technologies, you can compare the effects of market volatilities on Bakken Water and Geospace Technologies 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 Bakken Water with a short position of Geospace Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakken Water and Geospace Technologies.

Diversification Opportunities for Bakken Water and Geospace Technologies

-0.17

Correlation Coefficient

Bakken Water  Geospace Technologies

Good diversification

The 3 months correlation between Bakken and Geospace is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bakken Water Transfer and Geospace Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geospace Technologies and Bakken Water 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 Bakken Water Transfer are associated (or correlated) with Geospace Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geospace Technologies has no effect on the direction of Bakken Water i.e., Bakken Water and Geospace Technologies go up and down completely randomly.

Pair Corralation between Bakken Water and Geospace Technologies

Given the investment horizon of 90 days Bakken Water Transfer is expected to generate 3.92 times more return on investment than Geospace Technologies. However, Bakken Water is 3.92 times more volatile than Geospace Technologies. It trades about 0.18 of its potential returns per unit of risk. Geospace Technologies is currently generating about 0.0 per unit of risk. If you would invest  1.80  in Bakken Water Transfer on September 17, 2024 and sell it today you would earn a total of  4.20  from holding Bakken Water Transfer or generate 233.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Bakken Water Transfer  vs.  Geospace Technologies

Bakken Water Transfer

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bakken Water Transfer are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bakken Water showed solid returns over the last few months and may actually be approaching a breakup point.

Geospace Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geospace Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Geospace Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bakken Water and Geospace Technologies

The main advantage of trading using opposite Bakken Water and Geospace Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bakken Water position performs unexpectedly, Geospace Technologies 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 Geospace Technologies will offset losses from the drop in Geospace Technologies' long position.

The idea behind Bakken Water Transfer and Geospace Technologies 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.