Correlation Between Granite Ridge and Epsilon Energy

Can any of the company-specific risk be diversified away by investing in both Granite Ridge 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 Granite Ridge and Epsilon Energy 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 Epsilon Energy, you can compare the effects of market volatilities on Granite Ridge 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 Granite Ridge with a short position of Epsilon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Ridge and Epsilon Energy.

Diversification Opportunities for Granite Ridge and Epsilon Energy

-0.11

Correlation Coefficient

Granite Ridge  Epsilon Energy

Good diversification

The 3 months correlation between Granite and Epsilon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Granite Ridge Resources and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy 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 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 Granite Ridge i.e., Granite Ridge and Epsilon Energy go up and down completely randomly.

Pair Corralation between Granite Ridge and Epsilon Energy

Given the investment horizon of 90 days Granite Ridge is expected to generate 5.75 times less return on investment than Epsilon Energy. But when comparing it to its historical volatility, Granite Ridge Resources is 1.18 times less risky than Epsilon Energy. It trades about 0.03 of its potential returns per unit of risk. Epsilon Energy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  604.00  in Epsilon Energy on December 30, 2024 and sell it today you would earn a total of  113.00  from holding Epsilon Energy or generate 18.71% return on investment over 90 days.

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

Granite Ridge Resources  vs.  Epsilon Energy

Granite Ridge Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Ridge Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Granite Ridge is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Epsilon Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Epsilon Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Epsilon Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Granite Ridge and Epsilon Energy

The main advantage of trading using opposite Granite Ridge and Epsilon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Ridge 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 Granite Ridge Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.