Correlation Between Gran Tierra and VOC Energy

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

Diversification Opportunities for Gran Tierra and VOC Energy

0.97

Correlation Coefficient

Gran Tierra  VOC Energy

Almost no diversification

The 3 months correlation between Gran and VOC is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and VOC Energy Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOC Energy Trust 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 VOC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOC Energy Trust has no effect on the direction of Gran Tierra i.e., Gran Tierra and VOC Energy go up and down completely randomly.

Pair Corralation between Gran Tierra and VOC Energy

Considering the 90-day investment horizon Gran Tierra Energy is expected to generate 1.11 times more return on investment than VOC Energy. However, Gran Tierra is 1.11 times more volatile than VOC Energy Trust. It trades about -0.11 of its potential returns per unit of risk. VOC Energy Trust is currently generating about -0.15 per unit of risk. If you would invest  665.00  in Gran Tierra Energy on December 22, 2024 and sell it today you would lose (167.00) from holding Gran Tierra Energy or give up 25.11% of portfolio value over 90 days.

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

Gran Tierra Energy  vs.  VOC Energy Trust

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.

VOC Energy Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days VOC Energy Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Pair Trading with Gran Tierra and VOC Energy

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

The idea behind Gran Tierra Energy and VOC Energy Trust 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.