Correlation Between Gran Tierra and Kimbell Royalty

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

Diversification Opportunities for Gran Tierra and Kimbell Royalty

0.79

Correlation Coefficient

Gran Tierra  Kimbell Royalty

Poor diversification

The 3 months correlation between Gran and Kimbell is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and Kimbell Royalty Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimbell Royalty Partners 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 Kimbell Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimbell Royalty Partners has no effect on the direction of Gran Tierra i.e., Gran Tierra and Kimbell Royalty go up and down completely randomly.

Pair Corralation between Gran Tierra and Kimbell Royalty

Considering the 90-day investment horizon Gran Tierra Energy is expected to under-perform the Kimbell Royalty. In addition to that, Gran Tierra is 2.22 times more volatile than Kimbell Royalty Partners. It trades about -0.15 of its total potential returns per unit of risk. Kimbell Royalty Partners is currently generating about -0.07 per unit of volatility. If you would invest  1,530  in Kimbell Royalty Partners on December 26, 2024 and sell it today you would lose (116.00) from holding Kimbell Royalty Partners or give up 7.58% of portfolio value over 90 days.

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

Gran Tierra Energy  vs.  Kimbell Royalty Partners

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.

Kimbell Royalty Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kimbell Royalty Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Gran Tierra and Kimbell Royalty

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

The idea behind Gran Tierra Energy and Kimbell Royalty Partners 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 CEOs Directory module to screen CEOs from public companies around the world.