Correlation Between GeoPark and Permian Resources

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

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

Diversification Opportunities for GeoPark and Permian Resources

0.67

Correlation Coefficient

GeoPark  Permian Resources

Poor diversification

The 3 months correlation between GeoPark and Permian is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian 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 Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of GeoPark i.e., GeoPark and Permian Resources go up and down completely randomly.

Pair Corralation between GeoPark and Permian Resources

Given the investment horizon of 90 days GeoPark is expected to generate 1.43 times more return on investment than Permian Resources. However, GeoPark is 1.43 times more volatile than Permian Resources. It trades about 0.09 of its potential returns per unit of risk. Permian Resources is currently generating about 0.12 per unit of risk. If you would invest  839.00  in GeoPark on September 2, 2024 and sell it today you would earn a total of  131.00  from holding GeoPark or generate 15.61% return on investment over 90 days.

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

GeoPark  vs.  Permian Resources

GeoPark

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GeoPark are ranked lower than 7 (%) 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.

Permian Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Permian Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GeoPark and Permian Resources

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

The idea behind GeoPark and Permian 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..