Correlation Between PrimeEnergy and GeoPark

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

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

Diversification Opportunities for PrimeEnergy and GeoPark

0.22

Correlation Coefficient

PrimeEnergy  GeoPark

Modest diversification

The 3 months correlation between PrimeEnergy and GeoPark is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding PrimeEnergy and GeoPark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoPark and PrimeEnergy 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 PrimeEnergy 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 PrimeEnergy i.e., PrimeEnergy and GeoPark go up and down completely randomly.

Pair Corralation between PrimeEnergy and GeoPark

Given the investment horizon of 90 days PrimeEnergy is expected to generate 0.92 times more return on investment than GeoPark. However, PrimeEnergy is 1.08 times less risky than GeoPark. It trades about 0.01 of its potential returns per unit of risk. GeoPark is currently generating about -0.05 per unit of risk. If you would invest  22,389  in PrimeEnergy on December 30, 2024 and sell it today you would earn a total of  17.00  from holding PrimeEnergy or generate 0.08% return on investment over 90 days.

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

PrimeEnergy  vs.  GeoPark

PrimeEnergy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PrimeEnergy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with PrimeEnergy and GeoPark

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

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.