Correlation Between LandBridge Company and Matador Resources

Can any of the company-specific risk be diversified away by investing in both LandBridge Company 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 LandBridge Company and Matador Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LandBridge Company LLC and Matador Resources, you can compare the effects of market volatilities on LandBridge Company 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 LandBridge Company with a short position of Matador Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of LandBridge Company and Matador Resources.

Diversification Opportunities for LandBridge Company and Matador Resources

0.87

Correlation Coefficient

LandBridge Company  Matador Resources

Very poor diversification

The 3 months correlation between LandBridge and Matador is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding LandBridge Company LLC and Matador Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matador Resources and LandBridge Company 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 LandBridge Company LLC 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 LandBridge Company i.e., LandBridge Company and Matador Resources go up and down completely randomly.

Pair Corralation between LandBridge Company and Matador Resources

Allowing for the 90-day total investment horizon LandBridge Company LLC is expected to generate 2.26 times more return on investment than Matador Resources. However, LandBridge Company is 2.26 times more volatile than Matador Resources. It trades about 0.2 of its potential returns per unit of risk. Matador Resources is currently generating about 0.01 per unit of risk. If you would invest  2,312  in LandBridge Company LLC on September 14, 2024 and sell it today you would earn a total of  3,719  from holding LandBridge Company LLC or generate 160.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	43.87%
Values	Daily Returns

LandBridge Company LLC  vs.  Matador Resources

LandBridge Company

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LandBridge Company LLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, LandBridge Company sustained solid returns over the last few months and may actually be approaching a breakup point.

Matador Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matador Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Matador Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LandBridge Company and Matador Resources

The main advantage of trading using opposite LandBridge Company and Matador Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LandBridge Company 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.

The idea behind LandBridge Company LLC and Matador Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.