Correlation Between Black Stone and Sabine Royalty

Can any of the company-specific risk be diversified away by investing in both Black Stone and Sabine 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 Black Stone and Sabine Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Black Stone Minerals and Sabine Royalty Trust, you can compare the effects of market volatilities on Black Stone and Sabine 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 Black Stone with a short position of Sabine Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Stone and Sabine Royalty.

Diversification Opportunities for Black Stone and Sabine Royalty

0.64

Correlation Coefficient

Black Stone  Sabine Royalty

Poor diversification

The 3 months correlation between Black and Sabine is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Black Stone Minerals and Sabine Royalty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabine Royalty Trust and Black Stone 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 Black Stone Minerals are associated (or correlated) with Sabine Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabine Royalty Trust has no effect on the direction of Black Stone i.e., Black Stone and Sabine Royalty go up and down completely randomly.

Pair Corralation between Black Stone and Sabine Royalty

Considering the 90-day investment horizon Black Stone Minerals is expected to under-perform the Sabine Royalty. But the stock apears to be less risky and, when comparing its historical volatility, Black Stone Minerals is 1.23 times less risky than Sabine Royalty. The stock trades about 0.0 of its potential returns per unit of risk. The Sabine Royalty Trust is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,246  in Sabine Royalty Trust on September 14, 2024 and sell it today you would earn a total of  79.50  from holding Sabine Royalty Trust or generate 1.27% return on investment over 90 days.

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

Black Stone Minerals  vs.  Sabine Royalty Trust

Black Stone Minerals

Risk-Adjusted Performance

0 of 100

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 recent stock price disarray, may contribute to short-term losses for the investors.

Sabine Royalty Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Sabine Royalty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Black Stone and Sabine Royalty

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

The idea behind Black Stone Minerals and Sabine Royalty Trust 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.