Correlation Between Barnwell Industries and Sitio Royalties

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

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

Diversification Opportunities for Barnwell Industries and Sitio Royalties

0.32

Correlation Coefficient

Barnwell Industries  Sitio Royalties

Weak diversification

The 3 months correlation between Barnwell and Sitio is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Barnwell Industries 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 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 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 Barnwell Industries i.e., Barnwell Industries and Sitio Royalties go up and down completely randomly.

Pair Corralation between Barnwell Industries and Sitio Royalties

Considering the 90-day investment horizon Barnwell Industries is expected to generate 2.26 times more return on investment than Sitio Royalties. However, Barnwell Industries is 2.26 times more volatile than Sitio Royalties Corp. It trades about -0.05 of its potential returns per unit of risk. Sitio Royalties Corp is currently generating about -0.16 per unit of risk. If you would invest  174.00  in Barnwell Industries on November 30, 2024 and sell it today you would lose (27.91) from holding Barnwell Industries or give up 16.04% of portfolio value over 90 days.

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

Barnwell Industries  vs.  Sitio Royalties Corp

Barnwell Industries

Risk-Adjusted Performance

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 March 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Barnwell Industries and Sitio Royalties

The main advantage of trading using opposite Barnwell Industries and Sitio Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnwell Industries 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 Barnwell Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.