Correlation Between Hess and Matador Resources
Can any of the company-specific risk be diversified away by investing in both Hess 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 Hess and Matador Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hess Corporation and Matador Resources, you can compare the effects of market volatilities on Hess 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 Hess with a short position of Matador Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and Matador Resources.
Diversification Opportunities for Hess and Matador Resources
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hess and Matador is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and Matador Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matador Resources and Hess 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 Hess Corporation 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 Hess i.e., Hess and Matador Resources go up and down completely randomly.
Pair Corralation between Hess and Matador Resources
Considering the 90-day investment horizon Hess is expected to generate 1.71 times less return on investment than Matador Resources. But when comparing it to its historical volatility, Hess Corporation is 1.38 times less risky than Matador Resources. It trades about 0.02 of its potential returns per unit of risk. Matador Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,079 in Matador Resources on August 28, 2024 and sell it today you would earn a total of 840.00 from holding Matador Resources or generate 16.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hess Corp. vs. Matador Resources
Performance |
| Timeline |
| Hess |
| Matador Resources |
Hess and Matador Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hess and Matador Resources
The main advantage of trading using opposite Hess and Matador Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess 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.The idea behind Hess Corporation and Matador 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.| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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