Correlation Between Black Stone and Kimbell Royalty

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

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

Diversification Opportunities for Black Stone and Kimbell Royalty

0.22

Correlation Coefficient

Black Stone  Kimbell Royalty

Modest diversification

The 3 months correlation between Black and Kimbell is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Black Stone Minerals 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 Black Stone 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 Black Stone Minerals 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 Black Stone i.e., Black Stone and Kimbell Royalty go up and down completely randomly.

Pair Corralation between Black Stone and Kimbell Royalty

Considering the 90-day investment horizon Black Stone Minerals is expected to generate 1.05 times more return on investment than Kimbell Royalty. However, Black Stone is 1.05 times more volatile than Kimbell Royalty Partners. It trades about 0.15 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  1,439  in Black Stone Minerals on December 1, 2024 and sell it today you would earn a total of  57.00  from holding Black Stone Minerals or generate 3.96% return on investment over 90 days.

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

Black Stone Minerals  vs.  Kimbell Royalty Partners

Black Stone Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Black Stone Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Black Stone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 Black Stone and Kimbell Royalty

The main advantage of trading using opposite Black Stone and Kimbell Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Stone 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 Black Stone Minerals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.