Correlation Between Northern Oil and Granite Ridge

Can any of the company-specific risk be diversified away by investing in both Northern Oil and Granite Ridge 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 Northern Oil and Granite Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northern Oil Gas and Granite Ridge Resources, you can compare the effects of market volatilities on Northern Oil and Granite Ridge 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 Northern Oil with a short position of Granite Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Oil and Granite Ridge.

Diversification Opportunities for Northern Oil and Granite Ridge

0.88

Correlation Coefficient

Northern Oil  Granite Ridge

Very poor diversification

The 3 months correlation between Northern and Granite is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Northern Oil Gas and Granite Ridge Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Ridge Resources and Northern Oil 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 Northern Oil Gas are associated (or correlated) with Granite Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Ridge Resources has no effect on the direction of Northern Oil i.e., Northern Oil and Granite Ridge go up and down completely randomly.

Pair Corralation between Northern Oil and Granite Ridge

Considering the 90-day investment horizon Northern Oil Gas is expected to under-perform the Granite Ridge. In addition to that, Northern Oil is 1.21 times more volatile than Granite Ridge Resources. It trades about -0.11 of its total potential returns per unit of risk. Granite Ridge Resources is currently generating about 0.03 per unit of volatility. If you would invest  607.00  in Granite Ridge Resources on December 29, 2024 and sell it today you would earn a total of  13.00  from holding Granite Ridge Resources or generate 2.14% return on investment over 90 days.

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

Northern Oil Gas  vs.  Granite Ridge Resources

Northern Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Granite Ridge Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Ridge Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Granite Ridge is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Northern Oil and Granite Ridge

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

The idea behind Northern Oil Gas and Granite Ridge Resources 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 Commodity Directory module to find actively traded commodities issued by global exchanges.