Correlation Between BKV and Sitio Royalties

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

By analyzing existing cross correlation between BKV Corporation and Sitio Royalties Corp, you can compare the effects of market volatilities on BKV and Sitio Royalties 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 BKV with a short position of Sitio Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of BKV and Sitio Royalties.

Diversification Opportunities for BKV and Sitio Royalties

0.49

Correlation Coefficient

BKV  Sitio Royalties

Very weak diversification

The 3 months correlation between BKV and Sitio is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BKV Corp. and Sitio Royalties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitio Royalties Corp and BKV 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 BKV Corporation are associated (or correlated) with Sitio Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitio Royalties Corp has no effect on the direction of BKV i.e., BKV and Sitio Royalties go up and down completely randomly.

Pair Corralation between BKV and Sitio Royalties

Considering the 90-day investment horizon BKV Corporation is expected to under-perform the Sitio Royalties. In addition to that, BKV is 1.44 times more volatile than Sitio Royalties Corp. It trades about -0.06 of its total potential returns per unit of risk. Sitio Royalties Corp is currently generating about 0.0 per unit of volatility. If you would invest  2,012  in Sitio Royalties Corp on December 17, 2024 and sell it today you would lose (32.00) from holding Sitio Royalties Corp or give up 1.59% of portfolio value over 90 days.

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

BKV Corp.  vs.  Sitio Royalties Corp

BKV Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days BKV Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Sitio Royalties Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BKV and Sitio Royalties

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

The idea behind BKV Corporation and Sitio Royalties 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.