Correlation Between San Juan and Sitio Royalties

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

By analyzing existing cross correlation between San Juan Basin and Sitio Royalties Corp, you can compare the effects of market volatilities on San Juan and Sitio Royalties 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 San Juan with a short position of Sitio Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Juan and Sitio Royalties.

Diversification Opportunities for San Juan and Sitio Royalties

0.1

Correlation Coefficient

San Juan  Sitio Royalties

Average diversification

The 3 months correlation between San and Sitio is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Sitio Royalties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitio Royalties Corp and San Juan 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 San Juan Basin are associated (or correlated) with Sitio Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitio Royalties Corp has no effect on the direction of San Juan i.e., San Juan and Sitio Royalties go up and down completely randomly.

Pair Corralation between San Juan and Sitio Royalties

Considering the 90-day investment horizon San Juan Basin is expected to generate 2.04 times more return on investment than Sitio Royalties. However, San Juan is 2.04 times more volatile than Sitio Royalties Corp. It trades about 0.13 of its potential returns per unit of risk. Sitio Royalties Corp is currently generating about 0.0 per unit of risk. If you would invest  408.00  in San Juan Basin on December 17, 2024 and sell it today you would earn a total of  119.50  from holding San Juan Basin or generate 29.29% return on investment over 90 days.

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

San Juan Basin  vs.  Sitio Royalties Corp

San Juan Basin

Risk-Adjusted Performance

OK

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

Sitio Royalties Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sitio Royalties Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Sitio Royalties is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with San Juan and Sitio Royalties

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

The idea behind San Juan Basin and Sitio Royalties 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.