Correlation Between GeoPark and Petrus Resources

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

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

Diversification Opportunities for GeoPark and Petrus Resources

0.25

Correlation Coefficient

GeoPark  Petrus Resources

Modest diversification

The 3 months correlation between GeoPark and Petrus is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and Petrus Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrus 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 Petrus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrus Resources has no effect on the direction of GeoPark i.e., GeoPark and Petrus Resources go up and down completely randomly.

Pair Corralation between GeoPark and Petrus Resources

Given the investment horizon of 90 days GeoPark is expected to generate 2.51 times more return on investment than Petrus Resources. However, GeoPark is 2.51 times more volatile than Petrus Resources. It trades about 0.33 of its potential returns per unit of risk. Petrus Resources is currently generating about 0.01 per unit of risk. If you would invest  784.00  in GeoPark on September 1, 2024 and sell it today you would earn a total of  186.00  from holding GeoPark or generate 23.72% return on investment over 90 days.

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

GeoPark  vs.  Petrus 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.

Petrus Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Petrus Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Petrus Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GeoPark and Petrus Resources

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

The idea behind GeoPark and Petrus 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.