Correlation Between Matador Resources and Occidental Petroleum
Can any of the company-specific risk be diversified away by investing in both Matador Resources and Occidental Petroleum 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 Occidental Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matador Resources and Occidental Petroleum, you can compare the effects of market volatilities on Matador Resources and Occidental Petroleum 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 Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matador Resources and Occidental Petroleum.
Diversification Opportunities for Matador Resources and Occidental Petroleum
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Matador and Occidental is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Matador Resources i.e., Matador Resources and Occidental Petroleum go up and down completely randomly.
Pair Corralation between Matador Resources and Occidental Petroleum
Given the investment horizon of 90 days Matador Resources is expected to generate 1.71 times more return on investment than Occidental Petroleum. However, Matador Resources is 1.71 times more volatile than Occidental Petroleum. It trades about 0.32 of its potential returns per unit of risk. Occidental Petroleum is currently generating about 0.04 per unit of risk. If you would invest 5,189 in Matador Resources on September 1, 2024 and sell it today you would earn a total of 812.00 from holding Matador Resources or generate 15.65% 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. Occidental Petroleum
Performance |
| Timeline |
| Matador Resources |
| Occidental Petroleum |
Matador Resources and Occidental Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matador Resources and Occidental Petroleum
The main advantage of trading using opposite Matador Resources and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matador Resources position performs unexpectedly, Occidental Petroleum 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 Occidental Petroleum will offset losses from the drop in Occidental Petroleum's long position.| Matador Resources vs. Murphy Oil | Matador Resources vs. Civitas Resources | Matador Resources vs. Permian Resources | Matador Resources vs. Antero Resources Corp |
| Occidental Petroleum vs. Coterra Energy | Occidental Petroleum vs. Diamondback Energy | Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. EOG 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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