Correlation Between Gran Tierra and ERHC Energy

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

Diversification Opportunities for Gran Tierra and ERHC Energy

0.51

Correlation Coefficient

Gran Tierra  ERHC Energy

Very weak diversification

The 3 months correlation between Gran and ERHC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and ERHC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERHC Energy 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 ERHC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ERHC Energy has no effect on the direction of Gran Tierra i.e., Gran Tierra and ERHC Energy go up and down completely randomly.

Pair Corralation between Gran Tierra and ERHC Energy

Considering the 90-day investment horizon Gran Tierra Energy is expected to generate 0.33 times more return on investment than ERHC Energy. However, Gran Tierra Energy is 3.07 times less risky than ERHC Energy. It trades about -0.15 of its potential returns per unit of risk. ERHC Energy is currently generating about -0.18 per unit of risk. If you would invest  724.00  in Gran Tierra Energy on December 26, 2024 and sell it today you would lose (230.00) from holding Gran Tierra Energy or give up 31.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Gran Tierra Energy  vs.  ERHC Energy

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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ERHC Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days ERHC Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Gran Tierra and ERHC Energy

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

The idea behind Gran Tierra Energy and ERHC 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.