Correlation Between Sitio Royalties and Engie SA

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

Diversification Opportunities for Sitio Royalties and Engie SA

-0.05

Correlation Coefficient

Sitio Royalties  Engie SA

Good diversification

The 3 months correlation between Sitio and Engie is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sitio Royalties Corp and Engie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA 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 Engie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie SA has no effect on the direction of Sitio Royalties i.e., Sitio Royalties and Engie SA go up and down completely randomly.

Pair Corralation between Sitio Royalties and Engie SA

Considering the 90-day investment horizon Sitio Royalties is expected to generate 1.86 times less return on investment than Engie SA. But when comparing it to its historical volatility, Sitio Royalties Corp is 2.64 times less risky than Engie SA. It trades about 0.11 of its potential returns per unit of risk. Engie SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,604  in Engie SA on December 27, 2024 and sell it today you would earn a total of  287.00  from holding Engie SA or generate 17.89% return on investment over 90 days.

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

Sitio Royalties Corp  vs.  Engie SA

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 8 (%) 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.

Engie SA

Risk-Adjusted Performance

Modest

Over the last 90 days Engie SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Engie SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sitio Royalties and Engie SA

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

The idea behind Sitio Royalties Corp and Engie SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.