Correlation Between PrimeEnergy and Gran Tierra

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

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

Diversification Opportunities for PrimeEnergy and Gran Tierra

0.36

Correlation Coefficient

PrimeEnergy  Gran Tierra

Weak diversification

The 3 months correlation between PrimeEnergy and Gran is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding PrimeEnergy 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 PrimeEnergy 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 PrimeEnergy 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 PrimeEnergy i.e., PrimeEnergy and Gran Tierra go up and down completely randomly.

Pair Corralation between PrimeEnergy and Gran Tierra

Given the investment horizon of 90 days PrimeEnergy is expected to generate 1.25 times more return on investment than Gran Tierra. However, PrimeEnergy is 1.25 times more volatile than Gran Tierra Energy. It trades about 0.16 of its potential returns per unit of risk. Gran Tierra Energy is currently generating about 0.05 per unit of risk. If you would invest  13,400  in PrimeEnergy on September 17, 2024 and sell it today you would earn a total of  5,279  from holding PrimeEnergy or generate 39.4% return on investment over 90 days.

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

PrimeEnergy  vs.  Gran Tierra Energy

PrimeEnergy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PrimeEnergy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PrimeEnergy reported solid returns over the last few months and may actually be approaching a breakup point.

Gran Tierra Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gran Tierra Energy are ranked lower than 3 (%) 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 PrimeEnergy and Gran Tierra

The main advantage of trading using opposite PrimeEnergy and Gran Tierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PrimeEnergy 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 PrimeEnergy 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.

Check out your portfolio center.

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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.