Correlation Between SandRidge Mississippian and Cross Timbers

Can any of the company-specific risk be diversified away by investing in both SandRidge Mississippian 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 SandRidge Mississippian and Cross Timbers into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for SandRidge Mississippian and Cross Timbers

-0.11

Correlation Coefficient

SandRidge Mississippian  Cross Timbers

Good diversification

The 3 months correlation between SandRidge and Cross is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Mississippian Trust 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 SandRidge Mississippian 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 SandRidge Mississippian Trust 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 SandRidge Mississippian i.e., SandRidge Mississippian and Cross Timbers go up and down completely randomly.

Pair Corralation between SandRidge Mississippian and Cross Timbers

If you would invest  6.50  in SandRidge Mississippian Trust on September 26, 2024 and sell it today you would earn a total of  0.00  from holding SandRidge Mississippian Trust or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

SandRidge Mississippian Trust  vs.  Cross Timbers Royalty

SandRidge Mississippian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SandRidge Mississippian Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SandRidge Mississippian is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Cross Timbers Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cross Timbers Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cross Timbers is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SandRidge Mississippian and Cross Timbers

The main advantage of trading using opposite SandRidge Mississippian and Cross Timbers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Mississippian 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.

The idea behind SandRidge Mississippian Trust and Cross Timbers Royalty 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.