Correlation Between Geospace Technologies and Kodiak Gas

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

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

Diversification Opportunities for Geospace Technologies and Kodiak Gas

0.66

Correlation Coefficient

Geospace Technologies  Kodiak Gas

Poor diversification

The 3 months correlation between Geospace and Kodiak is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Geospace Technologies and Kodiak Gas Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Gas Services, and Geospace Technologies 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 Geospace Technologies are associated (or correlated) with Kodiak Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Gas Services, has no effect on the direction of Geospace Technologies i.e., Geospace Technologies and Kodiak Gas go up and down completely randomly.

Pair Corralation between Geospace Technologies and Kodiak Gas

Given the investment horizon of 90 days Geospace Technologies is expected to generate 0.99 times more return on investment than Kodiak Gas. However, Geospace Technologies is 1.01 times less risky than Kodiak Gas. It trades about 0.27 of its potential returns per unit of risk. Kodiak Gas Services, is currently generating about 0.21 per unit of risk. If you would invest  1,034  in Geospace Technologies on August 1, 2024 and sell it today you would earn a total of  126.00  from holding Geospace Technologies or generate 12.19% return on investment over 90 days.

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

Geospace Technologies  vs.  Kodiak Gas Services,

Geospace Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geospace Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Geospace Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kodiak Gas Services,

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Gas Services, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Kodiak Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geospace Technologies and Kodiak Gas

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

The idea behind Geospace Technologies and Kodiak Gas Services, 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.