Correlation Between Matador Resources and Epsilon Energy
Can any of the company-specific risk be diversified away by investing in both Matador Resources and Epsilon Energy 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 Matador Resources and Epsilon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matador Resources and Epsilon Energy, you can compare the effects of market volatilities on Matador Resources and Epsilon Energy 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 Matador Resources with a short position of Epsilon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matador Resources and Epsilon Energy.
Diversification Opportunities for Matador Resources and Epsilon Energy
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Matador and Epsilon is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and Epsilon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epsilon Energy and Matador 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 Matador Resources are associated (or correlated) with Epsilon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epsilon Energy has no effect on the direction of Matador Resources i.e., Matador Resources and Epsilon Energy go up and down completely randomly.
Pair Corralation between Matador Resources and Epsilon Energy
Given the investment horizon of 90 days Matador Resources is expected to under-perform the Epsilon Energy. In addition to that, Matador Resources is 1.08 times more volatile than Epsilon Energy. It trades about -0.23 of its total potential returns per unit of risk. Epsilon Energy is currently generating about -0.06 per unit of volatility. 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 |
Matador Resources vs. Epsilon Energy
Performance |
| Timeline |
| Matador Resources |
| Epsilon Energy |
Matador Resources and Epsilon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matador Resources and Epsilon Energy
The main advantage of trading using opposite Matador Resources and Epsilon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matador Resources position performs unexpectedly, Epsilon Energy 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 Epsilon Energy will offset losses from the drop in Epsilon Energy's long position.| Matador Resources vs. Murphy Oil | Matador Resources vs. Civitas Resources | Matador Resources vs. Permian Resources | Matador Resources vs. Antero Resources Corp |
| Epsilon Energy vs. Vaalco Energy | Epsilon Energy vs. PHX Minerals | Epsilon Energy vs. Northern Oil Gas | Epsilon Energy vs. Granite Ridge Resources |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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