Correlation Between Sabine Royalty and Gulfport Energy

Can any of the company-specific risk be diversified away by investing in both Sabine Royalty and Gulfport 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 Gulfport 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 Gulfport Energy Operating, you can compare the effects of market volatilities on Sabine Royalty and Gulfport 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 Gulfport Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabine Royalty and Gulfport Energy.

Diversification Opportunities for Sabine Royalty and Gulfport Energy

0.85

Correlation Coefficient

Sabine Royalty  Gulfport Energy

Very poor diversification

The 3 months correlation between Sabine and Gulfport is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sabine Royalty Trust and Gulfport Energy Operating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulfport Energy Operating 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 Gulfport Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulfport Energy Operating has no effect on the direction of Sabine Royalty i.e., Sabine Royalty and Gulfport Energy go up and down completely randomly.

Pair Corralation between Sabine Royalty and Gulfport Energy

Considering the 90-day investment horizon Sabine Royalty is expected to generate 3.28 times less return on investment than Gulfport Energy. But when comparing it to its historical volatility, Sabine Royalty Trust is 1.82 times less risky than Gulfport Energy. It trades about 0.08 of its potential returns per unit of risk. Gulfport Energy Operating is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  14,799  in Gulfport Energy Operating on September 18, 2024 and sell it today you would earn a total of  2,810  from holding Gulfport Energy Operating or generate 18.99% return on investment over 90 days.

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

Sabine Royalty Trust  vs.  Gulfport Energy Operating

Sabine Royalty Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Sabine Royalty is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Gulfport Energy Operating

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulfport Energy Operating are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gulfport Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sabine Royalty and Gulfport Energy

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

The idea behind Sabine Royalty Trust and Gulfport Energy Operating 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.