Correlation Between Sitio Royalties and Golden Agri-Resources

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

Diversification Opportunities for Sitio Royalties and Golden Agri-Resources

0.08

Correlation Coefficient

Sitio Royalties  Golden Agri-Resources

Significant diversification

The 3 months correlation between Sitio and Golden is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sitio Royalties Corp and Golden Agri Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Agri Resources 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 Golden Agri-Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Agri Resources has no effect on the direction of Sitio Royalties i.e., Sitio Royalties and Golden Agri-Resources go up and down completely randomly.

Pair Corralation between Sitio Royalties and Golden Agri-Resources

Considering the 90-day investment horizon Sitio Royalties is expected to generate 6.83 times less return on investment than Golden Agri-Resources. But when comparing it to its historical volatility, Sitio Royalties Corp is 3.96 times less risky than Golden Agri-Resources. It trades about 0.14 of its potential returns per unit of risk. Golden Agri Resources is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Golden Agri Resources on December 28, 2024 and sell it today you would earn a total of  6.00  from holding Golden Agri Resources or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Sitio Royalties Corp  vs.  Golden Agri Resources

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.

Golden Agri Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Agri Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Golden Agri-Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sitio Royalties and Golden Agri-Resources

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

The idea behind Sitio Royalties Corp and Golden Agri Resources 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.