Correlation Between Geodrill and ACT Energy

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

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

Diversification Opportunities for Geodrill and ACT Energy

-0.28

Correlation Coefficient

Geodrill  ACT Energy

Very good diversification

The 3 months correlation between Geodrill and ACT is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Geodrill Limited and ACT Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACT Energy Technologies and Geodrill 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 Geodrill Limited are associated (or correlated) with ACT Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACT Energy Technologies has no effect on the direction of Geodrill i.e., Geodrill and ACT Energy go up and down completely randomly.

Pair Corralation between Geodrill and ACT Energy

Assuming the 90 days trading horizon Geodrill Limited is expected to generate 1.48 times more return on investment than ACT Energy. However, Geodrill is 1.48 times more volatile than ACT Energy Technologies. It trades about 0.16 of its potential returns per unit of risk. ACT Energy Technologies is currently generating about -0.06 per unit of risk. If you would invest  296.00  in Geodrill Limited on April 24, 2025 and sell it today you would earn a total of  67.00  from holding Geodrill Limited or generate 22.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Geodrill Limited  vs.  ACT Energy Technologies

Geodrill Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Geodrill displayed solid returns over the last few months and may actually be approaching a breakup point.

ACT Energy Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days ACT Energy Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ACT Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Geodrill and ACT Energy

The main advantage of trading using opposite Geodrill and ACT Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geodrill position performs unexpectedly, ACT Energy 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 ACT Energy will offset losses from the drop in ACT Energy's long position.

The idea behind Geodrill Limited and ACT Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.