Correlation Between North American and Geospace Technologies
Can any of the company-specific risk be diversified away by investing in both North American and Geospace Technologies 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 North American and Geospace Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Geospace Technologies, you can compare the effects of market volatilities on North American and Geospace Technologies 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 North American with a short position of Geospace Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Geospace Technologies.
Diversification Opportunities for North American and Geospace Technologies
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between North and Geospace is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Geospace Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geospace Technologies and North American 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 North American Construction are associated (or correlated) with Geospace Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geospace Technologies has no effect on the direction of North American i.e., North American and Geospace Technologies go up and down completely randomly.
Pair Corralation between North American and Geospace Technologies
Considering the 90-day investment horizon North American Construction is expected to under-perform the Geospace Technologies. In addition to that, North American is 1.55 times more volatile than Geospace Technologies. It trades about -0.09 of its total potential returns per unit of risk. Geospace Technologies is currently generating about -0.11 per unit of volatility. If you would invest 1,001 in Geospace Technologies on October 22, 2024 and sell it today you would lose (27.00) from holding Geospace Technologies or give up 2.7% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
North American Construction vs. Geospace Technologies
Performance |
Timeline |
North American Const |
Geospace Technologies |
North American and Geospace Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with North American and Geospace Technologies
The main advantage of trading using opposite North American and Geospace Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Geospace Technologies 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 Geospace Technologies will offset losses from the drop in Geospace Technologies' long position.North American vs. Geospace Technologies | North American vs. MRC Global | North American vs. Natural Gas Services | North American vs. Now Inc |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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