Correlation Between Profire Ene and Geospace Technologies

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

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

Diversification Opportunities for Profire Ene and Geospace Technologies

0.76

Correlation Coefficient

Profire Ene  Geospace Technologies

Poor diversification

The 3 months correlation between Profire and Geospace is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Profire Ene and Geospace Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geospace Technologies and Profire Ene 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 Profire Ene 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 Profire Ene i.e., Profire Ene and Geospace Technologies go up and down completely randomly.

Pair Corralation between Profire Ene and Geospace Technologies

Given the investment horizon of 90 days Profire Ene is expected to generate 1.77 times more return on investment than Geospace Technologies. However, Profire Ene is 1.77 times more volatile than Geospace Technologies. It trades about 0.13 of its potential returns per unit of risk. Geospace Technologies is currently generating about 0.07 per unit of risk. If you would invest  166.00  in Profire Ene on September 4, 2024 and sell it today you would earn a total of  86.00  from holding Profire Ene or generate 51.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Profire Ene  vs.  Geospace Technologies

Profire Ene

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Profire Ene are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal forward indicators, Profire Ene exhibited solid returns over the last few months and may actually be approaching a breakup point.

Geospace Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Geospace Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Geospace Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Profire Ene and Geospace Technologies

The main advantage of trading using opposite Profire Ene and Geospace Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profire Ene 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.

The idea behind Profire Ene and Geospace Technologies 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.