Correlation Between GeoPark and Granite Ridge

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

By analyzing existing cross correlation between GeoPark and Granite Ridge Resources, you can compare the effects of market volatilities on GeoPark and Granite Ridge 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 Granite Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of GeoPark and Granite Ridge.

Diversification Opportunities for GeoPark and Granite Ridge

0.5

Correlation Coefficient

GeoPark  Granite Ridge

Very weak diversification

The 3 months correlation between GeoPark and Granite is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and Granite Ridge Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Ridge Resources 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 Granite Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Ridge Resources has no effect on the direction of GeoPark i.e., GeoPark and Granite Ridge go up and down completely randomly.

Pair Corralation between GeoPark and Granite Ridge

Given the investment horizon of 90 days GeoPark is expected to generate 1.66 times more return on investment than Granite Ridge. However, GeoPark is 1.66 times more volatile than Granite Ridge Resources. It trades about 0.19 of its potential returns per unit of risk. Granite Ridge Resources is currently generating about 0.07 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.  Granite Ridge Resources

GeoPark

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GeoPark are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, GeoPark disclosed solid returns over the last few months and may actually be approaching a breakup point.

Granite Ridge Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Ridge Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Granite Ridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GeoPark and Granite Ridge

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

The idea behind GeoPark and Granite Ridge Resources 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.