Correlation Between Cross Timbers and Kimbell Royalty

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

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

Diversification Opportunities for Cross Timbers and Kimbell Royalty

-0.47

Correlation Coefficient

Cross Timbers  Kimbell Royalty

Very good diversification

The 3 months correlation between Cross and Kimbell is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cross Timbers Royalty 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 Cross Timbers 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 Cross Timbers Royalty 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 Cross Timbers i.e., Cross Timbers and Kimbell Royalty go up and down completely randomly.

Pair Corralation between Cross Timbers and Kimbell Royalty

Considering the 90-day investment horizon Cross Timbers Royalty is expected to generate 1.17 times more return on investment than Kimbell Royalty. However, Cross Timbers is 1.17 times more volatile than Kimbell Royalty Partners. It trades about 0.19 of its potential returns per unit of risk. Kimbell Royalty Partners is currently generating about -0.08 per unit of risk. If you would invest  954.00  in Cross Timbers Royalty on December 28, 2024 and sell it today you would earn a total of  222.00  from holding Cross Timbers Royalty or generate 23.27% return on investment over 90 days.

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

Cross Timbers Royalty  vs.  Kimbell Royalty Partners

Cross Timbers Royalty

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cross Timbers Royalty are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cross Timbers unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Cross Timbers and Kimbell Royalty

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

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.