Correlation Between Matador Resources and EON Resources

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

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

Diversification Opportunities for Matador Resources and EON Resources

-0.44

Correlation Coefficient

Matador Resources  EON Resources

Very good diversification

The 3 months correlation between Matador and EON is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and EON Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EON Resources 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 EON Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EON Resources has no effect on the direction of Matador Resources i.e., Matador Resources and EON Resources go up and down completely randomly.

Pair Corralation between Matador Resources and EON Resources

Given the investment horizon of 90 days Matador Resources is expected to generate 0.31 times more return on investment than EON Resources. However, Matador Resources is 3.2 times less risky than EON Resources. It trades about 0.13 of its potential returns per unit of risk. EON Resources is currently generating about -0.12 per unit of risk. If you would invest  5,284  in Matador Resources on October 6, 2024 and sell it today you would earn a total of  623.00  from holding Matador Resources or generate 11.79% return on investment over 90 days.

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

Matador Resources  vs.  EON Resources

Matador Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Matador Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Matador Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

EON Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EON Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Matador Resources and EON Resources

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

The idea behind Matador Resources and EON 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..