Correlation Between Geospace Technologies and Ferguson Plc

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

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

Diversification Opportunities for Geospace Technologies and Ferguson Plc

0.64

Correlation Coefficient

Geospace Technologies  Ferguson Plc

Poor diversification

The 3 months correlation between Geospace and Ferguson is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Geospace Technologies and Ferguson Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferguson Plc and Geospace Technologies 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 Geospace Technologies are associated (or correlated) with Ferguson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferguson Plc has no effect on the direction of Geospace Technologies i.e., Geospace Technologies and Ferguson Plc go up and down completely randomly.

Pair Corralation between Geospace Technologies and Ferguson Plc

Given the investment horizon of 90 days Geospace Technologies is expected to under-perform the Ferguson Plc. In addition to that, Geospace Technologies is 1.78 times more volatile than Ferguson Plc. It trades about -0.17 of its total potential returns per unit of risk. Ferguson Plc is currently generating about -0.06 per unit of volatility. If you would invest  17,270  in Ferguson Plc on December 30, 2024 and sell it today you would lose (1,219) from holding Ferguson Plc or give up 7.06% of portfolio value over 90 days.

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

Geospace Technologies  vs.  Ferguson Plc

Geospace Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Geospace Technologies 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ferguson Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferguson Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Geospace Technologies and Ferguson Plc

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

The idea behind Geospace Technologies and Ferguson Plc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.