Correlation Between Sitio Royalties and Black Stone

Can any of the company-specific risk be diversified away by investing in both Sitio Royalties and Black Stone 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 Black Stone 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 Black Stone Minerals, you can compare the effects of market volatilities on Sitio Royalties and Black Stone 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 Black Stone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitio Royalties and Black Stone.

Diversification Opportunities for Sitio Royalties and Black Stone

0.7

Correlation Coefficient

Sitio Royalties  Black Stone

Poor diversification

The 3 months correlation between Sitio and Black is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sitio Royalties Corp and Black Stone Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Stone Minerals 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 Black Stone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Stone Minerals has no effect on the direction of Sitio Royalties i.e., Sitio Royalties and Black Stone go up and down completely randomly.

Pair Corralation between Sitio Royalties and Black Stone

Considering the 90-day investment horizon Sitio Royalties Corp is expected to under-perform the Black Stone. In addition to that, Sitio Royalties is 1.37 times more volatile than Black Stone Minerals. It trades about -0.26 of its total potential returns per unit of risk. Black Stone Minerals is currently generating about -0.1 per unit of volatility. If you would invest  1,550  in Black Stone Minerals on November 20, 2024 and sell it today you would lose (37.00) from holding Black Stone Minerals or give up 2.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Sitio Royalties Corp  vs.  Black Stone Minerals

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 unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Black Stone Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Black Stone Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Black Stone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sitio Royalties and Black Stone

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

The idea behind Sitio Royalties Corp and Black Stone Minerals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.