Correlation Between Permianville Royalty and Range Resources

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

Diversification Opportunities for Permianville Royalty and Range Resources

-0.32

Correlation Coefficient

Permianville Royalty  Range Resources

Very good diversification

The 3 months correlation between Permianville and Range is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and Range Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Range Resources Corp 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 Range Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Range Resources Corp has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and Range Resources go up and down completely randomly.

Pair Corralation between Permianville Royalty and Range Resources

Considering the 90-day investment horizon Permianville Royalty Trust is expected to under-perform the Range Resources. But the stock apears to be less risky and, when comparing its historical volatility, Permianville Royalty Trust is 1.12 times less risky than Range Resources. The stock trades about -0.28 of its potential returns per unit of risk. The Range Resources Corp is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  3,575  in Range Resources Corp on September 24, 2024 and sell it today you would lose (198.00) from holding Range Resources Corp or give up 5.54% of portfolio value over 90 days.

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

Permianville Royalty Trust  vs.  Range Resources Corp

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Range Resources Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Range Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Permianville Royalty and Range Resources

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

The idea behind Permianville Royalty Trust and Range Resources Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..