Correlation Between GeoPark and CGX Energy

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

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

Diversification Opportunities for GeoPark and CGX Energy

-0.18

Correlation Coefficient

GeoPark  CGX Energy

Good diversification

The 3 months correlation between GeoPark and CGX is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and CGX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGX Energy 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 CGX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGX Energy has no effect on the direction of GeoPark i.e., GeoPark and CGX Energy go up and down completely randomly.

Pair Corralation between GeoPark and CGX Energy

Given the investment horizon of 90 days GeoPark is expected to generate 0.41 times more return on investment than CGX Energy. However, GeoPark is 2.42 times less risky than CGX Energy. It trades about 0.01 of its potential returns per unit of risk. CGX Energy is currently generating about -0.06 per unit of risk. If you would invest  991.00  in GeoPark on October 5, 2024 and sell it today you would earn a total of  23.00  from holding GeoPark or generate 2.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

GeoPark  vs.  CGX Energy

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.

CGX Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CGX Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CGX Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GeoPark and CGX Energy

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

The idea behind GeoPark and CGX Energy 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.