Correlation Between Kelt Exploration and Gran Tierra

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

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

Diversification Opportunities for Kelt Exploration and Gran Tierra

0.81

Correlation Coefficient

Kelt Exploration  Gran Tierra

Very poor diversification

The 3 months correlation between Kelt and Gran is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Kelt Exploration and Gran Tierra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gran Tierra Energy and Kelt Exploration 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 Kelt Exploration are associated (or correlated) with Gran Tierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gran Tierra Energy has no effect on the direction of Kelt Exploration i.e., Kelt Exploration and Gran Tierra go up and down completely randomly.

Pair Corralation between Kelt Exploration and Gran Tierra

Assuming the 90 days trading horizon Kelt Exploration is expected to generate 0.59 times more return on investment than Gran Tierra. However, Kelt Exploration is 1.7 times less risky than Gran Tierra. It trades about 0.01 of its potential returns per unit of risk. Gran Tierra Energy is currently generating about -0.12 per unit of risk. If you would invest  679.00  in Kelt Exploration on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Kelt Exploration or generate 0.15% return on investment over 90 days.

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

Kelt Exploration  vs.  Gran Tierra Energy

Kelt Exploration

Risk-Adjusted Performance

Weak

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

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.

Pair Trading with Kelt Exploration and Gran Tierra

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

The idea behind Kelt Exploration and Gran Tierra 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.