Correlation Between Permianville Royalty and Kimbell Royalty

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

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

Diversification Opportunities for Permianville Royalty and Kimbell Royalty

0.07

Correlation Coefficient

Permianville Royalty  Kimbell Royalty

Significant diversification

The 3 months correlation between Permianville and Kimbell is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and Kimbell Royalty Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimbell Royalty Partners and Permianville 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 Permianville Royalty Trust are associated (or correlated) with Kimbell Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimbell Royalty Partners has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and Kimbell Royalty go up and down completely randomly.

Pair Corralation between Permianville Royalty and Kimbell Royalty

Considering the 90-day investment horizon Permianville Royalty Trust is expected to under-perform the Kimbell Royalty. In addition to that, Permianville Royalty is 1.34 times more volatile than Kimbell Royalty Partners. It trades about -0.14 of its total potential returns per unit of risk. Kimbell Royalty Partners is currently generating about -0.07 per unit of volatility. If you would invest  1,576  in Kimbell Royalty Partners on October 12, 2024 and sell it today you would lose (35.00) from holding Kimbell Royalty Partners or give up 2.22% of portfolio value over 90 days.

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

Permianville Royalty Trust  vs.  Kimbell Royalty Partners

Permianville Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permianville Royalty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Kimbell Royalty Partners

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Permianville Royalty and Kimbell Royalty

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

The idea behind Permianville Royalty Trust and Kimbell Royalty Partners 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.

Check out your portfolio center.

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.