Correlation Between Matador Resources and Evolution Petroleum

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

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

Diversification Opportunities for Matador Resources and Evolution Petroleum

0.68

Correlation Coefficient

Matador Resources  Evolution Petroleum

Poor diversification

The 3 months correlation between Matador and Evolution is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Petroleum 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 Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of Matador Resources i.e., Matador Resources and Evolution Petroleum go up and down completely randomly.

Pair Corralation between Matador Resources and Evolution Petroleum

Given the investment horizon of 90 days Matador Resources is expected to generate 0.88 times more return on investment than Evolution Petroleum. However, Matador Resources is 1.14 times less risky than Evolution Petroleum. It trades about 0.02 of its potential returns per unit of risk. Evolution Petroleum is currently generating about 0.01 per unit of risk. If you would invest  4,302  in Matador Resources on December 4, 2024 and sell it today you would earn a total of  472.00  from holding Matador Resources or generate 10.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Matador Resources  vs.  Evolution Petroleum

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 weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Evolution Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolution Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Matador Resources and Evolution Petroleum

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

The idea behind Matador Resources and Evolution Petroleum 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..