Correlation Between Gran Tierra and Headwater Exploration
Can any of the company-specific risk be diversified away by investing in both Gran Tierra and Headwater Exploration 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 Headwater Exploration 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 Headwater Exploration, you can compare the effects of market volatilities on Gran Tierra and Headwater Exploration 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 Headwater Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gran Tierra and Headwater Exploration.
Diversification Opportunities for Gran Tierra and Headwater Exploration
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gran and Headwater is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and Headwater Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Exploration 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 Headwater Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Exploration has no effect on the direction of Gran Tierra i.e., Gran Tierra and Headwater Exploration go up and down completely randomly.
Pair Corralation between Gran Tierra and Headwater Exploration
Assuming the 90 days trading horizon Gran Tierra Energy is expected to generate 1.69 times more return on investment than Headwater Exploration. However, Gran Tierra is 1.69 times more volatile than Headwater Exploration. It trades about 0.05 of its potential returns per unit of risk. Headwater Exploration is currently generating about 0.05 per unit of risk. If you would invest 896.00 in Gran Tierra Energy on September 3, 2024 and sell it today you would earn a total of 66.00 from holding Gran Tierra Energy or generate 7.37% 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. Headwater Exploration
Performance |
| Timeline |
| Gran Tierra Energy |
| Headwater Exploration |
Gran Tierra and Headwater Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gran Tierra and Headwater Exploration
The main advantage of trading using opposite Gran Tierra and Headwater Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gran Tierra position performs unexpectedly, Headwater Exploration 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 Headwater Exploration will offset losses from the drop in Headwater Exploration's long position.| Gran Tierra vs. NuVista Energy | Gran Tierra vs. Surge Energy | Gran Tierra vs. Birchcliff Energy | Gran Tierra vs. Kelt Exploration |
| Headwater Exploration vs. Tamarack Valley Energy | Headwater Exploration vs. Gear Energy | Headwater Exploration vs. Cardinal Energy | Headwater Exploration vs. NuVista Energy |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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