Correlation Between GeoPark and San Juan

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

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

Diversification Opportunities for GeoPark and San Juan

-0.49

Correlation Coefficient

GeoPark  San Juan

Very good diversification

The 3 months correlation between GeoPark and San is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and San Juan Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Juan Basin 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 San Juan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Juan Basin has no effect on the direction of GeoPark i.e., GeoPark and San Juan go up and down completely randomly.

Pair Corralation between GeoPark and San Juan

Given the investment horizon of 90 days GeoPark is expected to under-perform the San Juan. But the stock apears to be less risky and, when comparing its historical volatility, GeoPark is 1.19 times less risky than San Juan. The stock trades about -0.03 of its potential returns per unit of risk. The San Juan Basin is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  386.00  in San Juan Basin on December 28, 2024 and sell it today you would earn a total of  177.00  from holding San Juan Basin or generate 45.85% return on investment over 90 days.

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

GeoPark  vs.  San Juan Basin

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 unsteady 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.

San Juan Basin

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in San Juan Basin are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking indicators, San Juan unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GeoPark and San Juan

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

The idea behind GeoPark and San Juan Basin 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 Anywhere module to track or share privately all of your investments from the convenience of any device.