Correlation Between Matador Resources and Diamondback Energy
Can any of the company-specific risk be diversified away by investing in both Matador Resources and Diamondback 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 Diamondback 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 Diamondback Energy, you can compare the effects of market volatilities on Matador Resources and Diamondback 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 Diamondback Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matador Resources and Diamondback Energy.
Diversification Opportunities for Matador Resources and Diamondback Energy
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Matador and Diamondback is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback 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 Diamondback Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy has no effect on the direction of Matador Resources i.e., Matador Resources and Diamondback Energy go up and down completely randomly.
Pair Corralation between Matador Resources and Diamondback Energy
Given the investment horizon of 90 days Matador Resources is expected to generate 1.07 times more return on investment than Diamondback Energy. However, Matador Resources is 1.07 times more volatile than Diamondback Energy. It trades about 0.91 of its potential returns per unit of risk. Diamondback Energy is currently generating about 0.78 per unit of risk. If you would invest 5,336 in Matador Resources on October 24, 2024 and sell it today you would earn a total of 1,041 from holding Matador Resources or generate 19.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matador Resources vs. Diamondback Energy
Performance |
| Timeline |
| Matador Resources |
| Diamondback Energy |
Matador Resources and Diamondback Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matador Resources and Diamondback Energy
The main advantage of trading using opposite Matador Resources and Diamondback Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matador Resources position performs unexpectedly, Diamondback 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 Diamondback Energy will offset losses from the drop in Diamondback 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 |
| Diamondback Energy vs. Devon Energy | Diamondback Energy vs. Coterra Energy | Diamondback Energy vs. EOG Resources | Diamondback Energy vs. ConocoPhillips |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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