Correlation Between Matador Resources and Canadian Natural

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

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

Diversification Opportunities for Matador Resources and Canadian Natural

-0.25

Correlation Coefficient

Matador Resources  Canadian Natural

Very good diversification

The 3 months correlation between Matador and Canadian is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and Canadian Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Natural Res 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 Canadian Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Natural Res has no effect on the direction of Matador Resources i.e., Matador Resources and Canadian Natural go up and down completely randomly.

Pair Corralation between Matador Resources and Canadian Natural

Given the investment horizon of 90 days Matador Resources is expected to generate 0.94 times more return on investment than Canadian Natural. However, Matador Resources is 1.06 times less risky than Canadian Natural. It trades about 0.45 of its potential returns per unit of risk. Canadian Natural Resources is currently generating about 0.14 per unit of risk. If you would invest  5,419  in Matador Resources on October 27, 2024 and sell it today you would earn a total of  693.00  from holding Matador Resources or generate 12.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Matador Resources  vs.  Canadian Natural Resources

Matador Resources

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matador Resources are ranked lower than 13 (%) 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.

Canadian Natural Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Matador Resources and Canadian Natural

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

The idea behind Matador Resources and Canadian Natural 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.