Correlation Between Hugoton Royalty and GeoPark

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

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

Diversification Opportunities for Hugoton Royalty and GeoPark

-0.65

Correlation Coefficient

Hugoton Royalty  GeoPark

Excellent diversification

The 3 months correlation between Hugoton and GeoPark is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hugoton Royalty Trust and GeoPark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoPark and Hugoton Royalty 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 Hugoton Royalty Trust are associated (or correlated) with GeoPark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoPark has no effect on the direction of Hugoton Royalty i.e., Hugoton Royalty and GeoPark go up and down completely randomly.

Pair Corralation between Hugoton Royalty and GeoPark

Assuming the 90 days horizon Hugoton Royalty Trust is expected to under-perform the GeoPark. In addition to that, Hugoton Royalty is 1.68 times more volatile than GeoPark. It trades about -0.14 of its total potential returns per unit of risk. GeoPark is currently generating about 0.01 per unit of volatility. 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	Weak
Accuracy	20.0%
Values	Daily Returns

Hugoton Royalty Trust  vs.  GeoPark

Hugoton Royalty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hugoton Royalty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hugoton Royalty is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Hugoton Royalty and GeoPark

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

The idea behind Hugoton Royalty Trust and GeoPark 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.