Correlation Between Gran Tierra and SP 500

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Can any of the company-specific risk be diversified away by investing in both Gran Tierra and SP 500 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 SP 500 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 SP 500 EW, you can compare the effects of market volatilities on Gran Tierra and SP 500 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 SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gran Tierra and SP 500.

Diversification Opportunities for Gran Tierra and SP 500

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Gran Tierra and SP 500 is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and SP 500 EW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 EW 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 SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 EW has no effect on the direction of Gran Tierra i.e., Gran Tierra and SP 500 go up and down completely randomly.

Pair Corralation between Gran Tierra and SP 500

Considering the 90-day investment horizon Gran Tierra Energy is expected to generate 4.53 times more return on investment than SP 500. However, Gran Tierra is 4.53 times more volatile than SP 500 EW. It trades about 0.08 of its potential returns per unit of risk. SP 500 EW is currently generating about 0.04 per unit of risk. If you would invest  30.00  in Gran Tierra Energy on August 29, 2022 and sell it today you would earn a total of  86.00  from holding Gran Tierra Energy or generate 286.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Gran Tierra Energy  vs.  SP 500 EW

 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 unfluctuating 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

SP 500 EW 
SP 500 Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 EW are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, SP 500 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

SP 500 Price Channel

Gran Tierra and SP 500 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gran Tierra and SP 500

The main advantage of trading using opposite Gran Tierra and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gran Tierra position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.
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The idea behind Gran Tierra Energy and SP 500 EW 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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