Correlation Between Gran Tierra and Arrow Exploration

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

Diversification Opportunities for Gran Tierra and Arrow Exploration

0.9

Correlation Coefficient

Gran Tierra  Arrow Exploration

Almost no diversification

The 3 months correlation between Gran and Arrow is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Gran Tierra Energy and Arrow Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Exploration Corp 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 Arrow Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Exploration Corp has no effect on the direction of Gran Tierra i.e., Gran Tierra and Arrow Exploration go up and down completely randomly.

Pair Corralation between Gran Tierra and Arrow Exploration

Assuming the 90 days trading horizon Gran Tierra Energy is expected to generate 0.9 times more return on investment than Arrow Exploration. However, Gran Tierra Energy is 1.11 times less risky than Arrow Exploration. It trades about 0.01 of its potential returns per unit of risk. Arrow Exploration Corp is currently generating about 0.0 per unit of risk. If you would invest  632.00  in Gran Tierra Energy on April 24, 2025 and sell it today you would lose (16.00) from holding Gran Tierra Energy or give up 2.53% of portfolio value over 90 days.

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

Gran Tierra Energy  vs.  Arrow Exploration Corp

Gran Tierra Energy

Risk-Adjusted Performance

Very Weak

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 very healthy technical and fundamental indicators, Gran Tierra is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Arrow Exploration Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arrow Exploration Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Arrow Exploration is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Gran Tierra and Arrow Exploration

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

The idea behind Gran Tierra Energy and Arrow Exploration Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..