Correlation Between Riley Exploration and GeoPark

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

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

Diversification Opportunities for Riley Exploration and GeoPark

0.68

Correlation Coefficient

Riley Exploration  GeoPark

Poor diversification

The 3 months correlation between Riley and GeoPark is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Riley Exploration Permian and GeoPark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoPark and Riley Exploration 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 Riley Exploration Permian 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 Riley Exploration i.e., Riley Exploration and GeoPark go up and down completely randomly.

Pair Corralation between Riley Exploration and GeoPark

Given the investment horizon of 90 days Riley Exploration Permian is expected to generate 0.83 times more return on investment than GeoPark. However, Riley Exploration Permian is 1.2 times less risky than GeoPark. It trades about 0.21 of its potential returns per unit of risk. GeoPark is currently generating about 0.15 per unit of risk. If you would invest  2,589  in Riley Exploration Permian on September 4, 2024 and sell it today you would earn a total of  903.00  from holding Riley Exploration Permian or generate 34.88% return on investment over 90 days.

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

Riley Exploration Permian  vs.  GeoPark

Riley Exploration Permian

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Riley Exploration Permian are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Riley Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

GeoPark

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GeoPark are ranked lower than 11 (%) 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 Riley Exploration and GeoPark

The main advantage of trading using opposite Riley Exploration and GeoPark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Riley Exploration 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 Riley Exploration Permian 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.