Correlation Between GeoPark and Epsilon Energy

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

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

Diversification Opportunities for GeoPark and Epsilon Energy

-0.35

Correlation Coefficient

GeoPark  Epsilon Energy

Very good diversification

The 3 months correlation between GeoPark and Epsilon is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding GeoPark and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and GeoPark 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 GeoPark are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of GeoPark i.e., GeoPark and Epsilon Energy go up and down completely randomly.

Pair Corralation between GeoPark and Epsilon Energy

Given the investment horizon of 90 days GeoPark is expected to generate 1.45 times more return on investment than Epsilon Energy. However, GeoPark is 1.45 times more volatile than Epsilon Energy. It trades about 0.06 of its potential returns per unit of risk. Epsilon Energy is currently generating about 0.06 per unit of risk. If you would invest  632.00  in GeoPark on February 6, 2025 and sell it today you would earn a total of  21.00  from holding GeoPark or generate 3.32% return on investment over 90 days.

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

GeoPark  vs.  Epsilon Energy

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 unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Epsilon Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Epsilon Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Epsilon Energy may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with GeoPark and Epsilon Energy

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

The idea behind GeoPark and Epsilon Energy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..