Correlation Between Geospace Technologies and USA Compression

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

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

Diversification Opportunities for Geospace Technologies and USA Compression

0.42

Correlation Coefficient

Geospace Technologies  USA Compression

Very weak diversification

The 3 months correlation between Geospace and USA is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Geospace Technologies and USA Compression Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Compression Partners 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 USA Compression. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Compression Partners has no effect on the direction of Geospace Technologies i.e., Geospace Technologies and USA Compression go up and down completely randomly.

Pair Corralation between Geospace Technologies and USA Compression

Given the investment horizon of 90 days Geospace Technologies is expected to generate 2.76 times more return on investment than USA Compression. However, Geospace Technologies is 2.76 times more volatile than USA Compression Partners. It trades about 0.04 of its potential returns per unit of risk. USA Compression Partners is currently generating about 0.08 per unit of risk. If you would invest  1,006  in Geospace Technologies on September 12, 2024 and sell it today you would earn a total of  50.00  from holding Geospace Technologies or generate 4.97% return on investment over 90 days.

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

Geospace Technologies  vs.  USA Compression Partners

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.

USA Compression Partners

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in USA Compression Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, USA Compression may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Geospace Technologies and USA Compression

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

The idea behind Geospace Technologies and USA Compression Partners 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.