Correlation Between Marathon Oil and Matador Resources
Can any of the company-specific risk be diversified away by investing in both Marathon Oil 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 Marathon Oil and Matador Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marathon Oil and Matador Resources, you can compare the effects of market volatilities on Marathon Oil 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 Marathon Oil with a short position of Matador Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Oil and Matador Resources.
Diversification Opportunities for Marathon Oil and Matador Resources
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Marathon and Matador is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Oil and Matador Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matador Resources and Marathon Oil 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 Marathon Oil 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 Marathon Oil i.e., Marathon Oil and Matador Resources go up and down completely randomly.
Pair Corralation between Marathon Oil and Matador Resources
Considering the 90-day investment horizon Marathon Oil is expected to generate 2.3 times less return on investment than Matador Resources. But when comparing it to its historical volatility, Marathon Oil is 1.26 times less risky than Matador Resources. It trades about 0.2 of its potential returns per unit of risk. Matador Resources is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 5,054 in Matador Resources on August 24, 2024 and sell it today you would earn a total of 1,037 from holding Matador Resources or generate 20.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marathon Oil vs. Matador Resources
Performance |
| Timeline |
| Marathon Oil |
| Matador Resources |
Marathon Oil and Matador Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marathon Oil and Matador Resources
The main advantage of trading using opposite Marathon Oil and Matador Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marathon Oil 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.| Marathon Oil vs. EOG Resources | Marathon Oil vs. Diamondback Energy | Marathon Oil vs. Hess Corporation | Marathon Oil vs. Devon Energy |
| 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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