Correlation Between Matador Resources and GeoPark

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

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

Diversification Opportunities for Matador Resources and GeoPark

0.85

Correlation Coefficient

Matador Resources  GeoPark

Very poor diversification

The 3 months correlation between Matador and GeoPark is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and GeoPark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoPark 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 GeoPark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoPark has no effect on the direction of Matador Resources i.e., Matador Resources and GeoPark go up and down completely randomly.

Pair Corralation between Matador Resources and GeoPark

Given the investment horizon of 90 days Matador Resources is expected to generate 0.76 times more return on investment than GeoPark. However, Matador Resources is 1.32 times less risky than GeoPark. It trades about -0.05 of its potential returns per unit of risk. GeoPark is currently generating about -0.05 per unit of risk. If you would invest  5,504  in Matador Resources on December 29, 2024 and sell it today you would lose (453.00) from holding Matador Resources or give up 8.23% of portfolio value over 90 days.

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

Matador Resources  vs.  GeoPark

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.

GeoPark

Risk-Adjusted Performance

Very Weak

Over the last 90 days GeoPark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Matador Resources and GeoPark

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

The idea behind Matador Resources and GeoPark 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.