Correlation Between Geospace Technologies and Tetra Technologies

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

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

Diversification Opportunities for Geospace Technologies and Tetra Technologies

0.6

Correlation Coefficient

Geospace Technologies  Tetra Technologies

Poor diversification

The 3 months correlation between Geospace and Tetra is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Geospace Technologies and Tetra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetra Technologies and Geospace Technologies 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 Geospace Technologies are associated (or correlated) with Tetra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tetra Technologies has no effect on the direction of Geospace Technologies i.e., Geospace Technologies and Tetra Technologies go up and down completely randomly.

Pair Corralation between Geospace Technologies and Tetra Technologies

Given the investment horizon of 90 days Geospace Technologies is expected to generate 3.99 times less return on investment than Tetra Technologies. But when comparing it to its historical volatility, Geospace Technologies is 1.18 times less risky than Tetra Technologies. It trades about 0.04 of its potential returns per unit of risk. Tetra Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  284.00  in Tetra Technologies on September 12, 2024 and sell it today you would earn a total of  104.00  from holding Tetra Technologies or generate 36.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Geospace Technologies  vs.  Tetra Technologies

Geospace Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Geospace Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Geospace Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tetra Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tetra Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Tetra Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geospace Technologies and Tetra Technologies

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

The idea behind Geospace Technologies and Tetra 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.