Correlation Between PermRock Royalty and Black Stone

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

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

Diversification Opportunities for PermRock Royalty and Black Stone

0.67

Correlation Coefficient

PermRock Royalty  Black Stone

Poor diversification

The 3 months correlation between PermRock and Black is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PermRock Royalty Trust 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 PermRock 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 PermRock Royalty Trust 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 PermRock Royalty i.e., PermRock Royalty and Black Stone go up and down completely randomly.

Pair Corralation between PermRock Royalty and Black Stone

Considering the 90-day investment horizon PermRock Royalty Trust is expected to generate 1.75 times more return on investment than Black Stone. However, PermRock Royalty is 1.75 times more volatile than Black Stone Minerals. It trades about 0.13 of its potential returns per unit of risk. Black Stone Minerals is currently generating about -0.01 per unit of risk. If you would invest  380.00  in PermRock Royalty Trust on December 1, 2024 and sell it today you would earn a total of  66.00  from holding PermRock Royalty Trust or generate 17.37% return on investment over 90 days.

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

PermRock Royalty Trust  vs.  Black Stone Minerals

PermRock Royalty Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PermRock Royalty Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PermRock Royalty unveiled solid returns over the last few months and may actually be approaching a breakup point.

Black Stone Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Black Stone Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Black Stone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PermRock Royalty and Black Stone

The main advantage of trading using opposite PermRock Royalty and Black Stone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PermRock Royalty 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 PermRock Royalty Trust 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.