Correlation Between Antero Resources and Kimbell Royalty

Can any of the company-specific risk be diversified away by investing in both Antero Resources and Kimbell Royalty 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 Antero Resources and Kimbell Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Antero Resources Corp and Kimbell Royalty Partners, you can compare the effects of market volatilities on Antero Resources and Kimbell Royalty 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 Antero Resources with a short position of Kimbell Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Antero Resources and Kimbell Royalty.

Diversification Opportunities for Antero Resources and Kimbell Royalty

-0.12

Correlation Coefficient

Antero Resources  Kimbell Royalty

Good diversification

The 3 months correlation between Antero and Kimbell is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Antero Resources Corp and Kimbell Royalty Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimbell Royalty Partners and Antero Resources 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 Antero Resources Corp are associated (or correlated) with Kimbell Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimbell Royalty Partners has no effect on the direction of Antero Resources i.e., Antero Resources and Kimbell Royalty go up and down completely randomly.

Pair Corralation between Antero Resources and Kimbell Royalty

Allowing for the 90-day total investment horizon Antero Resources Corp is expected to generate 2.1 times more return on investment than Kimbell Royalty. However, Antero Resources is 2.1 times more volatile than Kimbell Royalty Partners. It trades about 0.1 of its potential returns per unit of risk. Kimbell Royalty Partners is currently generating about -0.07 per unit of risk. If you would invest  3,179  in Antero Resources Corp on December 1, 2024 and sell it today you would earn a total of  491.00  from holding Antero Resources Corp or generate 15.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Antero Resources Corp  vs.  Kimbell Royalty Partners

Antero Resources Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Resources Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Antero Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Kimbell Royalty Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kimbell Royalty Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Kimbell Royalty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Antero Resources and Kimbell Royalty

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

The idea behind Antero Resources Corp and Kimbell Royalty Partners 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.