Correlation Between Gran Tierra and Gulfport Energy

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

Diversification Opportunities for Gran Tierra and Gulfport Energy

-0.2

Correlation Coefficient

Gran Tierra  Gulfport Energy

Good diversification

The 3 months correlation between Gran and Gulfport is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and Gulfport Energy Operating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulfport Energy Operating 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 Gulfport Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulfport Energy Operating has no effect on the direction of Gran Tierra i.e., Gran Tierra and Gulfport Energy go up and down completely randomly.

Pair Corralation between Gran Tierra and Gulfport Energy

Considering the 90-day investment horizon Gran Tierra is expected to generate 5.65 times less return on investment than Gulfport Energy. In addition to that, Gran Tierra is 1.49 times more volatile than Gulfport Energy Operating. It trades about 0.02 of its total potential returns per unit of risk. Gulfport Energy Operating is currently generating about 0.2 per unit of volatility. If you would invest  13,955  in Gulfport Energy Operating on August 31, 2024 and sell it today you would earn a total of  3,769  from holding Gulfport Energy Operating or generate 27.01% return on investment over 90 days.

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

Gran Tierra Energy  vs.  Gulfport Energy Operating

Gran Tierra Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gran Tierra Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gran Tierra is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gulfport Energy Operating

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulfport Energy Operating are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gulfport Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gran Tierra and Gulfport Energy

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

The idea behind Gran Tierra Energy and Gulfport Energy Operating 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.