Correlation Between XXL Energy and Gran Tierra

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

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

Diversification Opportunities for XXL Energy and Gran Tierra

0.52

Correlation Coefficient

XXL Energy  Gran Tierra

Very weak diversification

The 3 months correlation between XXL and Gran is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding XXL Energy Corp 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 XXL Energy 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 XXL Energy Corp 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 XXL Energy i.e., XXL Energy and Gran Tierra go up and down completely randomly.

Pair Corralation between XXL Energy and Gran Tierra

Assuming the 90 days horizon XXL Energy Corp is expected to under-perform the Gran Tierra. In addition to that, XXL Energy is 4.07 times more volatile than Gran Tierra Energy. It trades about -0.13 of its total potential returns per unit of risk. Gran Tierra Energy is currently generating about 0.02 per unit of volatility. If you would invest  669.00  in Gran Tierra Energy on September 4, 2024 and sell it today you would earn a total of  12.00  from holding Gran Tierra Energy or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

XXL Energy Corp  vs.  Gran Tierra Energy

XXL Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XXL Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 XXL Energy and Gran Tierra

The main advantage of trading using opposite XXL Energy and Gran Tierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XXL Energy 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 XXL Energy Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.