Correlation Between CGX Energy and Gran Tierra

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

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

Diversification Opportunities for CGX Energy and Gran Tierra

-0.59

Correlation Coefficient

CGX Energy  Gran Tierra

Excellent diversification

The 3 months correlation between CGX and Gran is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding CGX Energy and Gran Tierra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gran Tierra Energy and CGX 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 CGX Energy are associated (or correlated) with Gran Tierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gran Tierra Energy has no effect on the direction of CGX Energy i.e., CGX Energy and Gran Tierra go up and down completely randomly.

Pair Corralation between CGX Energy and Gran Tierra

Assuming the 90 days horizon CGX Energy is expected to generate 2.81 times less return on investment than Gran Tierra. In addition to that, CGX Energy is 2.53 times more volatile than Gran Tierra Energy. It trades about 0.01 of its total potential returns per unit of risk. Gran Tierra Energy is currently generating about 0.1 per unit of volatility. If you would invest  634.00  in Gran Tierra Energy on October 9, 2024 and sell it today you would earn a total of  114.00  from holding Gran Tierra Energy or generate 17.98% return on investment over 90 days.

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

CGX Energy  vs.  Gran Tierra Energy

CGX Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CGX Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CGX Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gran Tierra Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gran Tierra Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Gran Tierra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CGX Energy and Gran Tierra

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

The idea behind CGX Energy and Gran Tierra 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.