Correlation Between Matador Resources and Earthstone Energy

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

Diversification Opportunities for Matador Resources and Earthstone Energy

0.0

Correlation Coefficient

Matador Resources  Earthstone Energy

Pay attention - limited upside

The 3 months correlation between Matador and Earthstone is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and Earthstone Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earthstone 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 Earthstone Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earthstone Energy has no effect on the direction of Matador Resources i.e., Matador Resources and Earthstone Energy go up and down completely randomly.

Pair Corralation between Matador Resources and Earthstone Energy

If you would invest (100.00) in Earthstone Energy on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Earthstone Energy or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Matador Resources  vs.  Earthstone Energy

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 latest weak performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Earthstone Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Earthstone Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Earthstone Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Matador Resources and Earthstone Energy

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

The idea behind Matador Resources and Earthstone 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.