Correlation Between Mach Natural and Gran Tierra

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

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

Diversification Opportunities for Mach Natural and Gran Tierra

0.71

Correlation Coefficient

Mach Natural  Gran Tierra

Poor diversification

The 3 months correlation between Mach and Gran is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Mach Natural Resources 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 Mach Natural 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 Mach Natural Resources 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 Mach Natural i.e., Mach Natural and Gran Tierra go up and down completely randomly.

Pair Corralation between Mach Natural and Gran Tierra

Considering the 90-day investment horizon Mach Natural is expected to generate 3.54 times less return on investment than Gran Tierra. But when comparing it to its historical volatility, Mach Natural Resources is 1.72 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 0.03 of returns per unit of risk over similar time horizon. If you would invest  608.00  in Gran Tierra Energy on August 31, 2024 and sell it today you would earn a total of  69.00  from holding Gran Tierra Energy or generate 11.35% return on investment over 90 days.

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

Mach Natural Resources  vs.  Gran Tierra Energy

Mach Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mach Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

Pair Trading with Mach Natural and Gran Tierra

The main advantage of trading using opposite Mach Natural and Gran Tierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mach Natural 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 Mach Natural Resources 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.