Correlation Between Gran Tierra and Axcella Health

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Can any of the company-specific risk be diversified away by investing in both Gran Tierra and Axcella Health 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 Axcella Health 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 Axcella Health, you can compare the effects of market volatilities on Gran Tierra and Axcella Health 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 Axcella Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gran Tierra and Axcella Health.

Diversification Opportunities for Gran Tierra and Axcella Health

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Gran Tierra and Axcella is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and Axcella Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axcella Health 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 Axcella Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axcella Health has no effect on the direction of Gran Tierra i.e., Gran Tierra and Axcella Health go up and down completely randomly.

Pair Corralation between Gran Tierra and Axcella Health

Considering the 90-day investment horizon Gran Tierra Energy is expected to under-perform the Axcella Health. But the stock apears to be less risky and, when comparing its historical volatility, Gran Tierra Energy is 2.28 times less risky than Axcella Health. The stock trades about -0.14 of its potential returns per unit of risk. The Axcella Health is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  103.00  in Axcella Health on September 3, 2022 and sell it today you would lose (12.00)  from holding Axcella Health or give up 11.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Gran Tierra Energy  vs.  Axcella Health

 Performance (%) 
       Timeline  
Gran Tierra Energy 
Gran Tierra Performance
0 of 100
Over the last 90 days Gran Tierra Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Gran Tierra Price Channel

Axcella Health 
Axcella Performance
0 of 100
Over the last 90 days Axcella Health 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 essential indicators remain somewhat strong which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long term up-swing for the company investors.

Axcella Price Channel

Gran Tierra and Axcella Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gran Tierra and Axcella Health

The main advantage of trading using opposite Gran Tierra and Axcella Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gran Tierra position performs unexpectedly, Axcella Health 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 Axcella Health will offset losses from the drop in Axcella Health's long position.
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The idea behind Gran Tierra Energy and Axcella Health 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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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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