Correlation Between EON Resources and Sitio Royalties

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

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

Diversification Opportunities for EON Resources and Sitio Royalties

0.65

Correlation Coefficient

EON Resources  Sitio Royalties

Poor diversification

The 3 months correlation between EON and Sitio is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding EON Resources 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 EON Resources 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 EON Resources 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 EON Resources i.e., EON Resources and Sitio Royalties go up and down completely randomly.

Pair Corralation between EON Resources and Sitio Royalties

Given the investment horizon of 90 days EON Resources is expected to generate 2.72 times less return on investment than Sitio Royalties. In addition to that, EON Resources is 5.72 times more volatile than Sitio Royalties Corp. It trades about 0.01 of its total potential returns per unit of risk. Sitio Royalties Corp is currently generating about 0.11 per unit of volatility. If you would invest  1,837  in Sitio Royalties Corp on December 26, 2024 and sell it today you would earn a total of  216.00  from holding Sitio Royalties Corp or generate 11.76% return on investment over 90 days.

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

EON Resources  vs.  Sitio Royalties Corp

EON Resources

Risk-Adjusted Performance

Weak

Over the last 90 days EON Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, EON Resources is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail 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 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Sitio Royalties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with EON Resources and Sitio Royalties

The main advantage of trading using opposite EON Resources and Sitio Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EON Resources 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 EON Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..