Correlation Between Permian Resources and Dorchester Minerals

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

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

Diversification Opportunities for Permian Resources and Dorchester Minerals

0.81

Correlation Coefficient

Permian Resources  Dorchester Minerals

Very poor diversification

The 3 months correlation between Permian and Dorchester is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Dorchester Minerals LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorchester 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 Dorchester Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorchester Minerals has no effect on the direction of Permian Resources i.e., Permian Resources and Dorchester Minerals go up and down completely randomly.

Pair Corralation between Permian Resources and Dorchester Minerals

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 1.15 times less return on investment than Dorchester Minerals. In addition to that, Permian Resources is 1.5 times more volatile than Dorchester Minerals LP. It trades about 0.09 of its total potential returns per unit of risk. Dorchester Minerals LP is currently generating about 0.15 per unit of volatility. If you would invest  2,894  in Dorchester Minerals LP on September 13, 2024 and sell it today you would earn a total of  384.00  from holding Dorchester Minerals LP or generate 13.27% return on investment over 90 days.

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

Permian Resources  vs.  Dorchester Minerals LP

Permian Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Permian Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dorchester Minerals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dorchester Minerals LP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Dorchester Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Permian Resources and Dorchester Minerals

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

The idea behind Permian Resources and Dorchester Minerals LP 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.