Correlation Between Civitas Resources and Gran Tierra

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

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

Diversification Opportunities for Civitas Resources and Gran Tierra

-0.34

Correlation Coefficient

Civitas Resources  Gran Tierra

Very good diversification

The 3 months correlation between Civitas and Gran is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Civitas 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 Civitas Resources 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 Civitas 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 Civitas Resources i.e., Civitas Resources and Gran Tierra go up and down completely randomly.

Pair Corralation between Civitas Resources and Gran Tierra

Given the investment horizon of 90 days Civitas Resources is expected to under-perform the Gran Tierra. But the stock apears to be less risky and, when comparing its historical volatility, Civitas Resources is 1.34 times less risky than Gran Tierra. The stock trades about -0.12 of its potential returns per unit of risk. The Gran Tierra Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  607.00  in Gran Tierra Energy on September 19, 2024 and sell it today you would earn a total of  52.00  from holding Gran Tierra Energy or generate 8.57% return on investment over 90 days.

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

Civitas Resources  vs.  Gran Tierra Energy

Civitas Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Civitas Resources 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 fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Gran Tierra Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gran Tierra Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Gran Tierra may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Civitas Resources and Gran Tierra

The main advantage of trading using opposite Civitas Resources and Gran Tierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Civitas Resources 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 Civitas 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.