Correlation Between Barnwell Industries and Kimbell Royalty

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

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

Diversification Opportunities for Barnwell Industries and Kimbell Royalty

-0.53

Correlation Coefficient

Barnwell Industries  Kimbell Royalty

Excellent diversification

The 3 months correlation between Barnwell and Kimbell is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Barnwell Industries 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 Barnwell Industries 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 Barnwell Industries 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 Barnwell Industries i.e., Barnwell Industries and Kimbell Royalty go up and down completely randomly.

Pair Corralation between Barnwell Industries and Kimbell Royalty

Considering the 90-day investment horizon Barnwell Industries is expected to under-perform the Kimbell Royalty. In addition to that, Barnwell Industries is 2.3 times more volatile than Kimbell Royalty Partners. It trades about -0.19 of its total potential returns per unit of risk. Kimbell Royalty Partners is currently generating about 0.11 per unit of volatility. If you would invest  1,515  in Kimbell Royalty Partners on September 3, 2024 and sell it today you would earn a total of  103.00  from holding Kimbell Royalty Partners or generate 6.8% return on investment over 90 days.

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

Barnwell Industries  vs.  Kimbell Royalty Partners

Barnwell Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barnwell Industries 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kimbell Royalty Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kimbell Royalty Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kimbell Royalty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Barnwell Industries and Kimbell Royalty

The main advantage of trading using opposite Barnwell Industries and Kimbell Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnwell Industries 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 Barnwell Industries 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.

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 the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.