Correlation Between Granite Ridge and California Resources

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

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

Diversification Opportunities for Granite Ridge and California Resources

0.82

Correlation Coefficient

Granite Ridge  California Resources

Very poor diversification

The 3 months correlation between Granite and California is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Granite Ridge Resources and California Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Resources Corp and Granite Ridge 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 Granite Ridge Resources are associated (or correlated) with California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources Corp has no effect on the direction of Granite Ridge i.e., Granite Ridge and California Resources go up and down completely randomly.

Pair Corralation between Granite Ridge and California Resources

Given the investment horizon of 90 days Granite Ridge is expected to generate 2.2 times less return on investment than California Resources. But when comparing it to its historical volatility, Granite Ridge Resources is 1.12 times less risky than California Resources. It trades about 0.07 of its potential returns per unit of risk. California Resources Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,977  in California Resources Corp on September 3, 2024 and sell it today you would earn a total of  939.00  from holding California Resources Corp or generate 18.87% return on investment over 90 days.

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

Granite Ridge Resources  vs.  California Resources Corp

Granite Ridge Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Ridge Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Granite Ridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

California Resources Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in California Resources Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, California Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Granite Ridge and California Resources

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

The idea behind Granite Ridge Resources and California Resources Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.