Correlation Between GeoPark and California Resources
Can any of the company-specific risk be diversified away by investing in both GeoPark and California Resources 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 California Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GeoPark and California Resources Corp, you can compare the effects of market volatilities on GeoPark and California Resources 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 California Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of GeoPark and California Resources.
Diversification Opportunities for GeoPark and California Resources
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GeoPark and California is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and California Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Resources Corp 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 California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources Corp has no effect on the direction of GeoPark i.e., GeoPark and California Resources go up and down completely randomly.
Pair Corralation between GeoPark and California Resources
Given the investment horizon of 90 days GeoPark is expected to generate 1.47 times more return on investment than California Resources. However, GeoPark is 1.47 times more volatile than California Resources Corp. It trades about 0.19 of its potential returns per unit of risk. California Resources Corp is currently generating about 0.13 per unit of risk. If you would invest 800.00 in GeoPark on September 5, 2024 and sell it today you would earn a total of 322.00 from holding GeoPark or generate 40.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.44% |
Values | Daily Returns |
GeoPark vs. California Resources Corp
Performance |
Timeline |
GeoPark |
California Resources Corp |
GeoPark and California Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GeoPark and California Resources
The main advantage of trading using opposite GeoPark and California Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GeoPark position performs unexpectedly, California Resources 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 California Resources will offset losses from the drop in California Resources' long position.GeoPark vs. Evolution Petroleum | GeoPark vs. Ring Energy | GeoPark vs. Gran Tierra Energy | GeoPark vs. PEDEVCO Corp |
California Resources vs. Evolution Petroleum | California Resources vs. Ring Energy | California Resources vs. Gran Tierra Energy | California Resources vs. PEDEVCO 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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