Correlation Between Matador Resources and Chesapeake Energy

Can any of the company-specific risk be diversified away by investing in both Matador Resources and Chesapeake 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 Chesapeake 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 Chesapeake Energy, you can compare the effects of market volatilities on Matador Resources and Chesapeake 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 Chesapeake Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matador Resources and Chesapeake Energy.

Diversification Opportunities for Matador Resources and Chesapeake Energy

-0.4

Correlation Coefficient

Matador Resources  Chesapeake Energy

Very good diversification

The 3 months correlation between Matador and Chesapeake is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake 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 Chesapeake Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Energy has no effect on the direction of Matador Resources i.e., Matador Resources and Chesapeake Energy go up and down completely randomly.

Pair Corralation between Matador Resources and Chesapeake Energy

If you would invest  8,146  in Chesapeake Energy on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Chesapeake Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Matador Resources  vs.  Chesapeake Energy

Matador Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Matador Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Matador Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unsteady technical indicators, Chesapeake Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Matador Resources and Chesapeake Energy

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

The idea behind Matador Resources and Chesapeake Energy 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.