Correlation Between Gran Tierra and InPlay Oil

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

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

Diversification Opportunities for Gran Tierra and InPlay Oil

0.73

Correlation Coefficient

Gran Tierra  InPlay Oil

Poor diversification

The 3 months correlation between Gran and InPlay is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp and Gran Tierra 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 Gran Tierra Energy are associated (or correlated) with InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Gran Tierra i.e., Gran Tierra and InPlay Oil go up and down completely randomly.

Pair Corralation between Gran Tierra and InPlay Oil

Assuming the 90 days trading horizon Gran Tierra Energy is expected to under-perform the InPlay Oil. In addition to that, Gran Tierra is 1.47 times more volatile than InPlay Oil Corp. It trades about -0.13 of its total potential returns per unit of risk. InPlay Oil Corp is currently generating about 0.01 per unit of volatility. If you would invest  164.00  in InPlay Oil Corp on December 29, 2024 and sell it today you would earn a total of  0.00  from holding InPlay Oil Corp or generate 0.0% return on investment over 90 days.

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

Gran Tierra Energy  vs.  InPlay Oil Corp

Gran Tierra Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gran Tierra Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

InPlay Oil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, InPlay Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gran Tierra and InPlay Oil

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

The idea behind Gran Tierra Energy and InPlay Oil 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.