Correlation Between Epsilon Energy and Matador Resources
Can any of the company-specific risk be diversified away by investing in both Epsilon Energy and Matador Resources 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 Epsilon Energy and Matador Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Epsilon Energy and Matador Resources, you can compare the effects of market volatilities on Epsilon Energy and Matador Resources 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 Epsilon Energy with a short position of Matador Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epsilon Energy and Matador Resources.
Diversification Opportunities for Epsilon Energy and Matador Resources
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Epsilon and Matador is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Epsilon Energy and Matador Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matador Resources and Epsilon Energy 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 Epsilon Energy are associated (or correlated) with Matador Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matador Resources has no effect on the direction of Epsilon Energy i.e., Epsilon Energy and Matador Resources go up and down completely randomly.
Pair Corralation between Epsilon Energy and Matador Resources
Given the investment horizon of 90 days Epsilon Energy is expected to generate 0.93 times more return on investment than Matador Resources. However, Epsilon Energy is 1.08 times less risky than Matador Resources. It trades about -0.06 of its potential returns per unit of risk. Matador Resources is currently generating about -0.23 per unit of risk. If you would invest 634.00 in Epsilon Energy on November 27, 2024 and sell it today you would lose (18.00) from holding Epsilon Energy or give up 2.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Epsilon Energy vs. Matador Resources
Performance |
| Timeline |
| Epsilon Energy |
| Matador Resources |
Epsilon Energy and Matador Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Epsilon Energy and Matador Resources
The main advantage of trading using opposite Epsilon Energy and Matador Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epsilon Energy position performs unexpectedly, Matador Resources 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 Matador Resources will offset losses from the drop in Matador Resources' long position.| Epsilon Energy vs. Vaalco Energy | Epsilon Energy vs. PHX Minerals | Epsilon Energy vs. Northern Oil Gas | Epsilon Energy vs. Granite Ridge Resources |
| Matador Resources vs. Murphy Oil | Matador Resources vs. Civitas Resources | Matador Resources vs. Permian Resources | Matador Resources vs. Antero Resources Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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