Correlation Between Sitio Royalties and Pioneer Natural

Can any of the company-specific risk be diversified away by investing in both Sitio Royalties and Pioneer Natural 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 Pioneer Natural 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 Pioneer Natural Resources, you can compare the effects of market volatilities on Sitio Royalties and Pioneer Natural 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 Pioneer Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sitio Royalties and Pioneer Natural.

Diversification Opportunities for Sitio Royalties and Pioneer Natural

0.03

Correlation Coefficient

Sitio Royalties  Pioneer Natural

Significant diversification

The 3 months correlation between Sitio and Pioneer is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sitio Royalties Corp and Pioneer Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Natural Resources 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 Pioneer Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Natural Resources has no effect on the direction of Sitio Royalties i.e., Sitio Royalties and Pioneer Natural go up and down completely randomly.

Pair Corralation between Sitio Royalties and Pioneer Natural

If you would invest  2,069  in Sitio Royalties Corp on September 5, 2024 and sell it today you would earn a total of  319.00  from holding Sitio Royalties Corp or generate 15.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Sitio Royalties Corp  vs.  Pioneer Natural Resources

Sitio Royalties Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitio Royalties Corp are ranked lower than 9 (%) 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.

Pioneer Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sitio Royalties and Pioneer Natural

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

The idea behind Sitio Royalties Corp and Pioneer Natural Resources 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.