Correlation Between Matador Resources and IA Financial

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

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

Diversification Opportunities for Matador Resources and IA Financial

0.51

Correlation Coefficient

Matador Resources  IA Financial

Very weak diversification

The 3 months correlation between Matador and IAFNF is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial 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 IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of Matador Resources i.e., Matador Resources and IA Financial go up and down completely randomly.

Pair Corralation between Matador Resources and IA Financial

Given the investment horizon of 90 days Matador Resources is expected to under-perform the IA Financial. In addition to that, Matador Resources is 1.52 times more volatile than iA Financial. It trades about -0.05 of its total potential returns per unit of risk. iA Financial is currently generating about -0.02 per unit of volatility. If you would invest  9,178  in iA Financial on December 29, 2024 and sell it today you would lose (233.00) from holding iA Financial or give up 2.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Matador Resources  vs.  iA Financial

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.

iA Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days iA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IA Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Matador Resources and IA Financial

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

The idea behind Matador Resources and iA Financial 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.