Correlation Between Granite Ridge and Hugoton Royalty

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

Diversification Opportunities for Granite Ridge and Hugoton Royalty

-0.37

Correlation Coefficient

Granite Ridge  Hugoton Royalty

Very good diversification

The 3 months correlation between Granite and Hugoton is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Granite Ridge Resources and Hugoton Royalty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hugoton Royalty Trust 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 Hugoton Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hugoton Royalty Trust has no effect on the direction of Granite Ridge i.e., Granite Ridge and Hugoton Royalty go up and down completely randomly.

Pair Corralation between Granite Ridge and Hugoton Royalty

Given the investment horizon of 90 days Granite Ridge Resources is expected to generate 0.71 times more return on investment than Hugoton Royalty. However, Granite Ridge Resources is 1.41 times less risky than Hugoton Royalty. It trades about 0.04 of its potential returns per unit of risk. Hugoton Royalty Trust is currently generating about -0.14 per unit of risk. If you would invest  448.00  in Granite Ridge Resources on October 5, 2024 and sell it today you would earn a total of  217.00  from holding Granite Ridge Resources or generate 48.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	20.0%
Values	Daily Returns

Granite Ridge Resources  vs.  Hugoton Royalty Trust

Granite Ridge Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Ridge Resources are ranked lower than 4 (%) 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 February 2025.

Hugoton Royalty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hugoton Royalty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hugoton Royalty is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Granite Ridge and Hugoton Royalty

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

The idea behind Granite Ridge Resources and Hugoton Royalty Trust 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.