Correlation Between ProPetro Holding and Geospace Technologies

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

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

Diversification Opportunities for ProPetro Holding and Geospace Technologies

-0.26

Correlation Coefficient

ProPetro Holding  Geospace Technologies

Very good diversification

The 3 months correlation between ProPetro and Geospace is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding ProPetro Holding Corp and Geospace Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geospace Technologies and ProPetro Holding 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 ProPetro Holding Corp 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 ProPetro Holding i.e., ProPetro Holding and Geospace Technologies go up and down completely randomly.

Pair Corralation between ProPetro Holding and Geospace Technologies

Given the investment horizon of 90 days ProPetro Holding is expected to generate 13.05 times less return on investment than Geospace Technologies. But when comparing it to its historical volatility, ProPetro Holding Corp is 1.16 times less risky than Geospace Technologies. It trades about 0.01 of its potential returns per unit of risk. Geospace Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  410.00  in Geospace Technologies on September 19, 2024 and sell it today you would earn a total of  560.00  from holding Geospace Technologies or generate 136.59% return on investment over 90 days.

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

ProPetro Holding Corp  vs.  Geospace Technologies

ProPetro Holding Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProPetro Holding Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, ProPetro Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Geospace Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ProPetro Holding and Geospace Technologies

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

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.