Correlation Between Geo Energy and New HopeLtd

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

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

Diversification Opportunities for Geo Energy and New HopeLtd

-0.32

Correlation Coefficient

Geo Energy  New HopeLtd

Very good diversification

The 3 months correlation between Geo and New is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Geo Energy Resources and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New HopeLtd and Geo Energy 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 Geo Energy Resources are associated (or correlated) with New HopeLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New HopeLtd has no effect on the direction of Geo Energy i.e., Geo Energy and New HopeLtd go up and down completely randomly.

Pair Corralation between Geo Energy and New HopeLtd

Assuming the 90 days horizon Geo Energy is expected to generate 15.96 times less return on investment than New HopeLtd. But when comparing it to its historical volatility, Geo Energy Resources is 3.19 times less risky than New HopeLtd. It trades about 0.01 of its potential returns per unit of risk. New Hope is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  280.00  in New Hope on September 2, 2024 and sell it today you would earn a total of  32.00  from holding New Hope or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.34%
Values	Daily Returns

Geo Energy Resources  vs.  New Hope

Geo Energy Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geo Energy Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

New HopeLtd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, New HopeLtd reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geo Energy and New HopeLtd

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

The idea behind Geo Energy Resources and New Hope 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.