Correlation Between Kimbell Royalty and Cross Timbers

Can any of the company-specific risk be diversified away by investing in both Kimbell Royalty and Cross Timbers 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 Cross Timbers 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 Cross Timbers Royalty, you can compare the effects of market volatilities on Kimbell Royalty and Cross Timbers 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 Cross Timbers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kimbell Royalty and Cross Timbers.

Diversification Opportunities for Kimbell Royalty and Cross Timbers

-0.47

Correlation Coefficient

Kimbell Royalty  Cross Timbers

Very good diversification

The 3 months correlation between Kimbell and Cross is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Kimbell Royalty Partners and Cross Timbers Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cross Timbers Royalty 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 Cross Timbers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cross Timbers Royalty has no effect on the direction of Kimbell Royalty i.e., Kimbell Royalty and Cross Timbers go up and down completely randomly.

Pair Corralation between Kimbell Royalty and Cross Timbers

Considering the 90-day investment horizon Kimbell Royalty Partners is expected to under-perform the Cross Timbers. But the stock apears to be less risky and, when comparing its historical volatility, Kimbell Royalty Partners is 1.17 times less risky than Cross Timbers. The stock trades about -0.08 of its potential returns per unit of risk. The Cross Timbers Royalty is currently generating about 0.19 of returns per unit of risk over similar time horizon. 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

Kimbell Royalty Partners  vs.  Cross Timbers Royalty

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.

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.

Pair Trading with Kimbell Royalty and Cross Timbers

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

The idea behind Kimbell Royalty Partners and Cross Timbers Royalty 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.