Correlation Between California Resources and Kimbell Royalty
Can any of the company-specific risk be diversified away by investing in both California Resources and Kimbell Royalty 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 California Resources and Kimbell Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Resources Corp and Kimbell Royalty Partners, you can compare the effects of market volatilities on California Resources and Kimbell Royalty 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 California Resources with a short position of Kimbell Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Resources and Kimbell Royalty.
Diversification Opportunities for California Resources and Kimbell Royalty
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Kimbell is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and Kimbell Royalty Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimbell Royalty Partners and California Resources 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 California Resources Corp are associated (or correlated) with Kimbell Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimbell Royalty Partners has no effect on the direction of California Resources i.e., California Resources and Kimbell Royalty go up and down completely randomly.
Pair Corralation between California Resources and Kimbell Royalty
Considering the 90-day investment horizon California Resources Corp is expected to under-perform the Kimbell Royalty. But the stock apears to be less risky and, when comparing its historical volatility, California Resources Corp is 1.18 times less risky than Kimbell Royalty. The stock trades about -0.08 of its potential returns per unit of risk. The Kimbell Royalty Partners is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,575 in Kimbell Royalty Partners on October 15, 2024 and sell it today you would lose (19.00) from holding Kimbell Royalty Partners or give up 1.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Resources Corp vs. Kimbell Royalty Partners
Performance |
| Timeline |
| California Resources Corp |
| Kimbell Royalty Partners |
California Resources and Kimbell Royalty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Resources and Kimbell Royalty
The main advantage of trading using opposite California Resources and Kimbell Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Resources position performs unexpectedly, Kimbell Royalty 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 Kimbell Royalty will offset losses from the drop in Kimbell Royalty's long position.| California Resources vs. Berry Petroleum Corp | California Resources vs. Magnolia Oil Gas | California Resources vs. Comstock Resources | California Resources vs. Gulfport Energy Operating |
| Kimbell Royalty vs. Dorchester Minerals LP | Kimbell Royalty vs. Sitio Royalties Corp | Kimbell Royalty vs. Coterra Energy | Kimbell Royalty vs. San Juan Basin |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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