Correlation Between Gran Tierra and XWC

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

Diversification Opportunities for Gran Tierra and XWC

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Gran Tierra and XWC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and XWC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWC 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 XWC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWC has no effect on the direction of Gran Tierra i.e., Gran Tierra and XWC go up and down completely randomly.

Pair Corralation between Gran Tierra and XWC

Considering the 90-day investment horizon Gran Tierra Energy is expected to under-perform the XWC. But the stock apears to be less risky and, when comparing its historical volatility, Gran Tierra Energy is 3.13 times less risky than XWC. The stock trades about -0.36 of its potential returns per unit of risk. The XWC is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3.16  in XWC on September 9, 2022 and sell it today you would earn a total of  1.97  from holding XWC or generate 62.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

Gran Tierra Energy  vs.  XWC

 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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Gran Tierra Price Channel

XWC 
XWC Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in XWC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XWC sustained solid returns over the last few months and may actually be approaching a breakup point.

XWC Price Channel

Gran Tierra and XWC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gran Tierra and XWC

The main advantage of trading using opposite Gran Tierra and XWC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gran Tierra position performs unexpectedly, XWC 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 XWC will offset losses from the drop in XWC's long position.
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The idea behind Gran Tierra Energy and XWC 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 Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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