Correlation Between GeoPark and Tamboran Resources

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

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

Diversification Opportunities for GeoPark and Tamboran Resources

-0.28

Correlation Coefficient

GeoPark  Tamboran Resources

Very good diversification

The 3 months correlation between GeoPark and Tamboran is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and Tamboran Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamboran Resources 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 Tamboran Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamboran Resources has no effect on the direction of GeoPark i.e., GeoPark and Tamboran Resources go up and down completely randomly.

Pair Corralation between GeoPark and Tamboran Resources

Given the investment horizon of 90 days GeoPark is expected to under-perform the Tamboran Resources. But the stock apears to be less risky and, when comparing its historical volatility, GeoPark is 1.45 times less risky than Tamboran Resources. The stock trades about -0.05 of its potential returns per unit of risk. The Tamboran Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,860  in Tamboran Resources on December 29, 2024 and sell it today you would earn a total of  567.00  from holding Tamboran Resources or generate 30.48% return on investment over 90 days.

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

GeoPark  vs.  Tamboran Resources

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.

Tamboran Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tamboran Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Tamboran Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GeoPark and Tamboran Resources

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

The idea behind GeoPark and Tamboran Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.