Correlation Between Matador Resources and CHK Old

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

By analyzing existing cross correlation between Matador Resources and CHK Old, you can compare the effects of market volatilities on Matador Resources and CHK Old 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 CHK Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matador Resources and CHK Old.

Diversification Opportunities for Matador Resources and CHK Old

-0.31

Correlation Coefficient

Matador Resources  CHK Old

Very good diversification

The 3 months correlation between Matador and CHK is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and CHK Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHK Old 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 CHK Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHK Old has no effect on the direction of Matador Resources i.e., Matador Resources and CHK Old go up and down completely randomly.

Pair Corralation between Matador Resources and CHK Old

Given the investment horizon of 90 days Matador Resources is expected to generate 1.19 times more return on investment than CHK Old. However, Matador Resources is 1.19 times more volatile than CHK Old. It trades about 0.13 of its potential returns per unit of risk. CHK Old is currently generating about 0.14 per unit of risk. If you would invest  5,173  in Matador Resources on October 24, 2024 and sell it today you would earn a total of  1,204  from holding Matador Resources or generate 23.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	8.64%
Values	Daily Returns

Matador Resources  vs.  CHK Old

Matador Resources

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matador Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Matador Resources reported solid returns over the last few months and may actually be approaching a breakup point.

CHK Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHK Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, CHK Old is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Matador Resources and CHK Old

The main advantage of trading using opposite Matador Resources and CHK Old positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matador Resources position performs unexpectedly, CHK Old 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 CHK Old will offset losses from the drop in CHK Old's long position.

The idea behind Matador Resources and CHK Old 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.