Correlation Between Sitio Royalties and Adidas AG

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

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

Diversification Opportunities for Sitio Royalties and Adidas AG

0.1

Correlation Coefficient

Sitio Royalties  Adidas AG

Average diversification

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

Pair Corralation between Sitio Royalties and Adidas AG

Considering the 90-day investment horizon Sitio Royalties Corp is expected to generate 0.99 times more return on investment than Adidas AG. However, Sitio Royalties Corp is 1.01 times less risky than Adidas AG. It trades about 0.09 of its potential returns per unit of risk. Adidas AG ADR is currently generating about -0.01 per unit of risk. If you would invest  1,845  in Sitio Royalties Corp on December 28, 2024 and sell it today you would earn a total of  175.00  from holding Sitio Royalties Corp or generate 9.49% return on investment over 90 days.

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

Sitio Royalties Corp  vs.  Adidas AG ADR

Sitio Royalties Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitio Royalties Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Sitio Royalties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Adidas AG ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adidas AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Adidas AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sitio Royalties and Adidas AG

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

The idea behind Sitio Royalties Corp and Adidas AG ADR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.