Correlation Between North European and Matador Resources
Can any of the company-specific risk be diversified away by investing in both North European 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 North European and Matador Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North European Oil and Matador Resources, you can compare the effects of market volatilities on North European 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 North European with a short position of Matador Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of North European and Matador Resources.
Diversification Opportunities for North European and Matador Resources
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between North and Matador is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding North European Oil and Matador Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matador Resources and North European 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 North European 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 North European i.e., North European and Matador Resources go up and down completely randomly.
Pair Corralation between North European and Matador Resources
Considering the 90-day investment horizon North European Oil is expected to under-perform the Matador Resources. In addition to that, North European is 1.56 times more volatile than Matador Resources. It trades about -0.04 of its total potential returns per unit of risk. Matador Resources is currently generating about 0.02 per unit of volatility. If you would invest 5,616 in Matador Resources on September 4, 2024 and sell it today you would earn a total of 273.00 from holding Matador Resources or generate 4.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North European Oil vs. Matador Resources
Performance |
| Timeline |
| North European Oil |
| Matador Resources |
North European and Matador Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North European and Matador Resources
The main advantage of trading using opposite North European and Matador Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North European 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.| North European vs. Cross Timbers Royalty | North European vs. VOC Energy Trust | North European vs. Sabine Royalty Trust | North European vs. Permianville Royalty Trust |
| 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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