Correlation Between GeoPark and Inpex

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

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

Diversification Opportunities for GeoPark and Inpex

-0.62

Correlation Coefficient

GeoPark  Inpex

Excellent diversification

The 3 months correlation between GeoPark and Inpex is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and Inpex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inpex 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 Inpex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inpex has no effect on the direction of GeoPark i.e., GeoPark and Inpex go up and down completely randomly.

Pair Corralation between GeoPark and Inpex

Given the investment horizon of 90 days GeoPark is expected to generate 3.23 times less return on investment than Inpex. But when comparing it to its historical volatility, GeoPark is 1.44 times less risky than Inpex. It trades about 0.01 of its potential returns per unit of risk. Inpex is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  916.00  in Inpex on October 5, 2024 and sell it today you would earn a total of  183.00  from holding Inpex or generate 19.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	80.88%
Values	Daily Returns

GeoPark  vs.  Inpex

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.

Inpex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inpex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GeoPark and Inpex

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

The idea behind GeoPark and Inpex 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.