Correlation Between Permian Resources and Black Stone

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

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

Diversification Opportunities for Permian Resources and Black Stone

0.09

Correlation Coefficient

Permian Resources  Black Stone

Significant diversification

The 3 months correlation between Permian and Black is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Black Stone Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Stone Minerals and Permian 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 Permian Resources are associated (or correlated) with Black Stone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Stone Minerals has no effect on the direction of Permian Resources i.e., Permian Resources and Black Stone go up and down completely randomly.

Pair Corralation between Permian Resources and Black Stone

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 5.89 times less return on investment than Black Stone. In addition to that, Permian Resources is 1.98 times more volatile than Black Stone Minerals. It trades about 0.01 of its total potential returns per unit of risk. Black Stone Minerals is currently generating about 0.12 per unit of volatility. If you would invest  1,399  in Black Stone Minerals on December 28, 2024 and sell it today you would earn a total of  119.00  from holding Black Stone Minerals or generate 8.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Permian Resources  vs.  Black Stone Minerals

Permian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Permian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Permian Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Black Stone Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Black Stone Minerals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Black Stone may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Permian Resources and Black Stone

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

The idea behind Permian Resources and Black Stone Minerals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..