Correlation Between Matador Resources and Dorchester Minerals

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

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

Diversification Opportunities for Matador Resources and Dorchester Minerals

0.76

Correlation Coefficient

Matador Resources  Dorchester Minerals

Poor diversification

The 3 months correlation between Matador and Dorchester is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and Dorchester Minerals LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorchester Minerals 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 Dorchester Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorchester Minerals has no effect on the direction of Matador Resources i.e., Matador Resources and Dorchester Minerals go up and down completely randomly.

Pair Corralation between Matador Resources and Dorchester Minerals

Given the investment horizon of 90 days Matador Resources is expected to generate 1.83 times more return on investment than Dorchester Minerals. However, Matador Resources is 1.83 times more volatile than Dorchester Minerals LP. It trades about -0.02 of its potential returns per unit of risk. Dorchester Minerals LP is currently generating about -0.06 per unit of risk. If you would invest  5,384  in Matador Resources on December 24, 2024 and sell it today you would lose (233.00) from holding Matador Resources or give up 4.33% of portfolio value over 90 days.

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

Matador Resources  vs.  Dorchester Minerals LP

Matador Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matador Resources has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Dorchester Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dorchester Minerals LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Dorchester Minerals is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Matador Resources and Dorchester Minerals

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

The idea behind Matador Resources and Dorchester Minerals LP 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 CEOs Directory module to screen CEOs from public companies around the world.