Correlation Between Gran Tierra and WT Offshore

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

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

Diversification Opportunities for Gran Tierra and WT Offshore

0.47

Correlation Coefficient

Gran Tierra  WT Offshore

Very weak diversification

The 3 months correlation between Gran and WTI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and WT Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Offshore and Gran Tierra 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 Gran Tierra Energy are associated (or correlated) with WT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Offshore has no effect on the direction of Gran Tierra i.e., Gran Tierra and WT Offshore go up and down completely randomly.

Pair Corralation between Gran Tierra and WT Offshore

Considering the 90-day investment horizon Gran Tierra Energy is expected to generate 0.74 times more return on investment than WT Offshore. However, Gran Tierra Energy is 1.34 times less risky than WT Offshore. It trades about 0.03 of its potential returns per unit of risk. WT Offshore is currently generating about -0.01 per unit of risk. If you would invest  666.00  in Gran Tierra Energy on September 3, 2024 and sell it today you would earn a total of  22.00  from holding Gran Tierra Energy or generate 3.3% return on investment over 90 days.

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

Gran Tierra Energy  vs.  WT Offshore

Gran Tierra Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gran Tierra Energy are ranked lower than 2 (%) 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.

WT Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, WT Offshore is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Gran Tierra and WT Offshore

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

The idea behind Gran Tierra Energy and WT Offshore 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.