Correlation Between Sabine Royalty and PetroShale

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

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

Diversification Opportunities for Sabine Royalty and PetroShale

-0.39

Correlation Coefficient

Sabine Royalty  PetroShale

Very good diversification

The 3 months correlation between Sabine and PetroShale is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sabine Royalty Trust and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale and Sabine 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 Sabine Royalty Trust are associated (or correlated) with PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of Sabine Royalty i.e., Sabine Royalty and PetroShale go up and down completely randomly.

Pair Corralation between Sabine Royalty and PetroShale

Considering the 90-day investment horizon Sabine Royalty Trust is expected to generate 0.55 times more return on investment than PetroShale. However, Sabine Royalty Trust is 1.82 times less risky than PetroShale. It trades about 0.03 of its potential returns per unit of risk. PetroShale is currently generating about 0.01 per unit of risk. If you would invest  5,637  in Sabine Royalty Trust on October 5, 2024 and sell it today you would earn a total of  879.00  from holding Sabine Royalty Trust or generate 15.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

Sabine Royalty Trust  vs.  PetroShale

Sabine Royalty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Sabine Royalty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sabine Royalty and PetroShale

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

The idea behind Sabine Royalty Trust and PetroShale 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.