Correlation Between California Resources and GeoPark

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

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

Diversification Opportunities for California Resources and GeoPark

0.35

Correlation Coefficient

California Resources  GeoPark

Weak diversification

The 3 months correlation between California and GeoPark is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and GeoPark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoPark and California Resources 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 California Resources Corp are associated (or correlated) with GeoPark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoPark has no effect on the direction of California Resources i.e., California Resources and GeoPark go up and down completely randomly.

Pair Corralation between California Resources and GeoPark

Considering the 90-day investment horizon California Resources Corp is expected to under-perform the GeoPark. But the stock apears to be less risky and, when comparing its historical volatility, California Resources Corp is 1.67 times less risky than GeoPark. The stock trades about -0.21 of its potential returns per unit of risk. The GeoPark is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  970.00  in GeoPark on November 28, 2024 and sell it today you would lose (117.00) from holding GeoPark or give up 12.06% of portfolio value over 90 days.

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

California Resources Corp  vs.  GeoPark

California Resources Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days California Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

GeoPark

Risk-Adjusted Performance

Very Weak

Over the last 90 days GeoPark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with California Resources and GeoPark

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

The idea behind California Resources Corp and GeoPark 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.