Correlation Between SM Energy and Gran Tierra
Can any of the company-specific risk be diversified away by investing in both SM 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 SM 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 SM Energy Co and Gran Tierra Energy, you can compare the effects of market volatilities on SM 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 SM Energy with a short position of Gran Tierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Gran Tierra.
Diversification Opportunities for SM Energy and Gran Tierra
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SM Energy and Gran is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co 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 SM 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 SM Energy Co 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 SM Energy i.e., SM Energy and Gran Tierra go up and down completely randomly.
Pair Corralation between SM Energy and Gran Tierra
Allowing for the 90-day total investment horizon SM Energy is expected to generate 1.41 times less return on investment than Gran Tierra. But when comparing it to its historical volatility, SM Energy Co is 1.53 times less risky than Gran Tierra. It trades about 0.12 of its potential returns per unit of risk. Gran Tierra Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 631.00 in Gran Tierra Energy on August 31, 2024 and sell it today you would earn a total of 46.00 from holding Gran Tierra Energy or generate 7.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Energy Co vs. Gran Tierra Energy
Performance |
| Timeline |
| SM Energy |
| Gran Tierra Energy |
SM Energy and Gran Tierra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Gran Tierra
The main advantage of trading using opposite SM Energy and Gran Tierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM 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.| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
| Gran Tierra vs. Permian Resources | Gran Tierra vs. PEDEVCO Corp | Gran Tierra vs. Vermilion Energy | Gran Tierra vs. Ovintiv |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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