Correlation Between Permian Resources and Cross Timbers
Can any of the company-specific risk be diversified away by investing in both Permian Resources and Cross Timbers 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 Permian Resources and Cross Timbers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permian Resources and Cross Timbers Royalty, you can compare the effects of market volatilities on Permian Resources and Cross Timbers 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 Permian Resources with a short position of Cross Timbers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and Cross Timbers.
Diversification Opportunities for Permian Resources and Cross Timbers
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Permian and Cross is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Cross Timbers Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cross Timbers Royalty and Permian 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 Permian Resources are associated (or correlated) with Cross Timbers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cross Timbers Royalty has no effect on the direction of Permian Resources i.e., Permian Resources and Cross Timbers go up and down completely randomly.
Pair Corralation between Permian Resources and Cross Timbers
Allowing for the 90-day total investment horizon Permian Resources is expected to generate 0.83 times more return on investment than Cross Timbers. However, Permian Resources is 1.21 times less risky than Cross Timbers. It trades about 0.33 of its potential returns per unit of risk. Cross Timbers Royalty is currently generating about 0.12 per unit of risk. If you would invest 1,359 in Permian Resources on August 31, 2024 and sell it today you would earn a total of 200.00 from holding Permian Resources or generate 14.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permian Resources vs. Cross Timbers Royalty
Performance |
| Timeline |
| Permian Resources |
| Cross Timbers Royalty |
Permian Resources and Cross Timbers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Resources and Cross Timbers
The main advantage of trading using opposite Permian Resources and Cross Timbers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources position performs unexpectedly, Cross Timbers 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 Cross Timbers will offset losses from the drop in Cross Timbers' long position.| Permian Resources vs. Devon Energy | Permian Resources vs. EOG Resources | Permian Resources vs. Coterra Energy | Permian Resources vs. Range Resources Corp |
| Cross Timbers vs. Sabine Royalty Trust | Cross Timbers vs. Mesa Royalty Trust | Cross Timbers vs. San Juan Basin | Cross Timbers vs. Permian Basin Royalty |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |