Correlation Between Gran Tierra and Highland Longshort

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

Diversification Opportunities for Gran Tierra and Highland Longshort

0.88

Correlation Coefficient

Gran Tierra  Highland Longshort

Very poor diversification

The 3 months correlation between Gran and Highland is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort 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 Highland Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Longshort has no effect on the direction of Gran Tierra i.e., Gran Tierra and Highland Longshort go up and down completely randomly.

Pair Corralation between Gran Tierra and Highland Longshort

Considering the 90-day investment horizon Gran Tierra Energy is expected to generate 16.53 times more return on investment than Highland Longshort. However, Gran Tierra is 16.53 times more volatile than Highland Longshort Healthcare. It trades about 0.28 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.29 per unit of risk. If you would invest  497.00  in Gran Tierra Energy on January 20, 2024 and sell it today you would earn a total of  302.00  from holding Gran Tierra Energy or generate 60.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Gran Tierra Energy  vs.  Highland Longshort Healthcare

Gran Tierra Energy

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gran Tierra Energy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Gran Tierra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Highland Longshort

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Highland Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gran Tierra and Highland Longshort

The main advantage of trading using opposite Gran Tierra and Highland Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gran Tierra position performs unexpectedly, Highland Longshort 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 Highland Longshort will offset losses from the drop in Highland Longshort's long position.

The idea behind Gran Tierra Energy and Highland Longshort Healthcare 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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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.