Correlation Between Granite Ridge and PrimeEnergy

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

Diversification Opportunities for Granite Ridge and PrimeEnergy

0.63

Correlation Coefficient

Granite Ridge  PrimeEnergy

Poor diversification

The 3 months correlation between Granite and PrimeEnergy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Granite Ridge Resources and PrimeEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrimeEnergy 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 PrimeEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrimeEnergy has no effect on the direction of Granite Ridge i.e., Granite Ridge and PrimeEnergy go up and down completely randomly.

Pair Corralation between Granite Ridge and PrimeEnergy

Given the investment horizon of 90 days Granite Ridge is expected to generate 5.33 times less return on investment than PrimeEnergy. But when comparing it to its historical volatility, Granite Ridge Resources is 1.7 times less risky than PrimeEnergy. It trades about 0.08 of its potential returns per unit of risk. PrimeEnergy is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  13,139  in PrimeEnergy on September 4, 2024 and sell it today you would earn a total of  7,641  from holding PrimeEnergy or generate 58.16% return on investment over 90 days.

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

Granite Ridge Resources  vs.  PrimeEnergy

Granite Ridge Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Ridge Resources are ranked lower than 6 (%) 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.

PrimeEnergy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, PrimeEnergy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Granite Ridge and PrimeEnergy

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

The idea behind Granite Ridge Resources and PrimeEnergy 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.