Correlation Between Berry Petroleum and Sitio Royalties

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

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

Diversification Opportunities for Berry Petroleum and Sitio Royalties

0.55

Correlation Coefficient

Berry Petroleum  Sitio Royalties

Very weak diversification

The 3 months correlation between Berry and Sitio is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Berry Petroleum 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 Berry Petroleum 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 Berry Petroleum Corp 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 Berry Petroleum i.e., Berry Petroleum and Sitio Royalties go up and down completely randomly.

Pair Corralation between Berry Petroleum and Sitio Royalties

Considering the 90-day investment horizon Berry Petroleum Corp is expected to under-perform the Sitio Royalties. In addition to that, Berry Petroleum is 1.75 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 0.12 per unit of volatility. If you would invest  1,815  in Sitio Royalties Corp on December 27, 2024 and sell it today you would earn a total of  236.00  from holding Sitio Royalties Corp or generate 13.0% return on investment over 90 days.

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

Berry Petroleum Corp  vs.  Sitio Royalties Corp

Berry Petroleum Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Berry Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sitio Royalties Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitio Royalties Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Sitio Royalties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berry Petroleum and Sitio Royalties

The main advantage of trading using opposite Berry Petroleum and Sitio Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berry Petroleum 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 Berry Petroleum Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.