Correlation Between Kimbell Royalty and CNX Resources

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

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

Diversification Opportunities for Kimbell Royalty and CNX Resources

0.39

Correlation Coefficient

Kimbell Royalty  CNX Resources

Weak diversification

The 3 months correlation between Kimbell and CNX is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Kimbell Royalty Partners and CNX Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNX Resources Corp and Kimbell Royalty 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 Kimbell Royalty Partners are associated (or correlated) with CNX Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNX Resources Corp has no effect on the direction of Kimbell Royalty i.e., Kimbell Royalty and CNX Resources go up and down completely randomly.

Pair Corralation between Kimbell Royalty and CNX Resources

Considering the 90-day investment horizon Kimbell Royalty is expected to generate 3.9 times less return on investment than CNX Resources. But when comparing it to its historical volatility, Kimbell Royalty Partners is 2.06 times less risky than CNX Resources. It trades about 0.1 of its potential returns per unit of risk. CNX Resources Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,829  in CNX Resources Corp on November 28, 2024 and sell it today you would earn a total of  196.00  from holding CNX Resources Corp or generate 6.93% return on investment over 90 days.

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

Kimbell Royalty Partners  vs.  CNX Resources Corp

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.

CNX Resources Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNX Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kimbell Royalty and CNX Resources

The main advantage of trading using opposite Kimbell Royalty and CNX Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimbell Royalty position performs unexpectedly, CNX Resources 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 CNX Resources will offset losses from the drop in CNX Resources' long position.

The idea behind Kimbell Royalty Partners and CNX Resources 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.