Correlation Between Sitio Royalties and Alsea SAB

Can any of the company-specific risk be diversified away by investing in both Sitio Royalties and Alsea SAB 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 Sitio Royalties and Alsea SAB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sitio Royalties Corp and Alsea SAB de, you can compare the effects of market volatilities on Sitio Royalties and Alsea SAB 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 Sitio Royalties with a short position of Alsea SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitio Royalties and Alsea SAB.

Diversification Opportunities for Sitio Royalties and Alsea SAB

-0.63

Correlation Coefficient

Sitio Royalties  Alsea SAB

Excellent diversification

The 3 months correlation between Sitio and Alsea is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sitio Royalties Corp and Alsea SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alsea SAB de and Sitio Royalties 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 Sitio Royalties Corp are associated (or correlated) with Alsea SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alsea SAB de has no effect on the direction of Sitio Royalties i.e., Sitio Royalties and Alsea SAB go up and down completely randomly.

Pair Corralation between Sitio Royalties and Alsea SAB

Considering the 90-day investment horizon Sitio Royalties Corp is expected to generate 0.54 times more return on investment than Alsea SAB. However, Sitio Royalties Corp is 1.86 times less risky than Alsea SAB. It trades about 0.17 of its potential returns per unit of risk. Alsea SAB de is currently generating about -0.09 per unit of risk. If you would invest  2,203  in Sitio Royalties Corp on September 1, 2024 and sell it today you would earn a total of  167.00  from holding Sitio Royalties Corp or generate 7.58% return on investment over 90 days.

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

Sitio Royalties Corp  vs.  Alsea SAB de

Sitio Royalties Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitio Royalties Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Sitio Royalties reported solid returns over the last few months and may actually be approaching a breakup point.

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sitio Royalties and Alsea SAB

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

The idea behind Sitio Royalties Corp and Alsea SAB de 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.