Correlation Between California Resources and Kimbell Royalty

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

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

Diversification Opportunities for California Resources and Kimbell Royalty

0.95

Correlation Coefficient

California Resources  Kimbell Royalty

Almost no diversification

The 3 months correlation between California and Kimbell is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and Kimbell Royalty Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimbell Royalty Partners and California Resources 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 California Resources Corp are associated (or correlated) with Kimbell Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimbell Royalty Partners has no effect on the direction of California Resources i.e., California Resources and Kimbell Royalty go up and down completely randomly.

Pair Corralation between California Resources and Kimbell Royalty

Considering the 90-day investment horizon California Resources is expected to generate 1.14 times less return on investment than Kimbell Royalty. In addition to that, California Resources is 1.35 times more volatile than Kimbell Royalty Partners. It trades about 0.18 of its total potential returns per unit of risk. Kimbell Royalty Partners is currently generating about 0.27 per unit of volatility. If you would invest  1,147  in Kimbell Royalty Partners on May 7, 2025 and sell it today you would earn a total of  327.00  from holding Kimbell Royalty Partners or generate 28.51% return on investment over 90 days.

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

California Resources Corp  vs.  Kimbell Royalty Partners

California Resources Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in California Resources Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, California Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kimbell Royalty Partners

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kimbell Royalty Partners are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kimbell Royalty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with California Resources and Kimbell Royalty

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

The idea behind California Resources Corp and Kimbell Royalty Partners 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.