Correlation Between CKX Lands and Riley Exploration

Can any of the company-specific risk be diversified away by investing in both CKX Lands and Riley Exploration 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 CKX Lands and Riley Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CKX Lands and Riley Exploration Permian, you can compare the effects of market volatilities on CKX Lands and Riley Exploration 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 CKX Lands with a short position of Riley Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of CKX Lands and Riley Exploration.

Diversification Opportunities for CKX Lands and Riley Exploration

-0.75

Correlation Coefficient

CKX Lands  Riley Exploration

Pay attention - limited upside

The 3 months correlation between CKX and Riley is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding CKX Lands and Riley Exploration Permian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riley Exploration Permian and CKX Lands 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 CKX Lands are associated (or correlated) with Riley Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riley Exploration Permian has no effect on the direction of CKX Lands i.e., CKX Lands and Riley Exploration go up and down completely randomly.

Pair Corralation between CKX Lands and Riley Exploration

Considering the 90-day investment horizon CKX Lands is expected to under-perform the Riley Exploration. But the stock apears to be less risky and, when comparing its historical volatility, CKX Lands is 1.26 times less risky than Riley Exploration. The stock trades about -0.09 of its potential returns per unit of risk. The Riley Exploration Permian is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,677  in Riley Exploration Permian on September 1, 2024 and sell it today you would earn a total of  833.00  from holding Riley Exploration Permian or generate 31.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.13%
Values	Daily Returns

CKX Lands  vs.  Riley Exploration Permian

CKX Lands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CKX Lands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Riley Exploration Permian

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Riley Exploration Permian are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Riley Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CKX Lands and Riley Exploration

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

The idea behind CKX Lands and Riley Exploration Permian 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.