Correlation Between Sabine Royalty and Alamo Energy

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

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

Diversification Opportunities for Sabine Royalty and Alamo Energy

0.0

Correlation Coefficient

Sabine Royalty  Alamo Energy

Pay attention - limited upside

The 3 months correlation between Sabine and Alamo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sabine Royalty Trust and Alamo Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Energy Corp and Sabine Royalty 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 Sabine Royalty Trust are associated (or correlated) with Alamo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Energy Corp has no effect on the direction of Sabine Royalty i.e., Sabine Royalty and Alamo Energy go up and down completely randomly.

Pair Corralation between Sabine Royalty and Alamo Energy

If you would invest  5,830  in Sabine Royalty Trust on September 26, 2024 and sell it today you would earn a total of  752.00  from holding Sabine Royalty Trust or generate 12.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sabine Royalty Trust  vs.  Alamo Energy Corp

Sabine Royalty Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Sabine Royalty reported solid returns over the last few months and may actually be approaching a breakup point.

Alamo Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alamo Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Alamo Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sabine Royalty and Alamo Energy

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

The idea behind Sabine Royalty Trust and Alamo Energy Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.