Correlation Between Matador Resources and PetroTal Corp

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

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

Diversification Opportunities for Matador Resources and PetroTal Corp

0.27

Correlation Coefficient

Matador Resources  PetroTal Corp

Modest diversification

The 3 months correlation between Matador and PetroTal is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and PetroTal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroTal Corp 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 PetroTal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroTal Corp has no effect on the direction of Matador Resources i.e., Matador Resources and PetroTal Corp go up and down completely randomly.

Pair Corralation between Matador Resources and PetroTal Corp

Given the investment horizon of 90 days Matador Resources is expected to under-perform the PetroTal Corp. But the stock apears to be less risky and, when comparing its historical volatility, Matador Resources is 1.07 times less risky than PetroTal Corp. The stock trades about -0.05 of its potential returns per unit of risk. The PetroTal Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  39.00  in PetroTal Corp on December 30, 2024 and sell it today you would earn a total of  9.00  from holding PetroTal Corp or generate 23.08% return on investment over 90 days.

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

Matador Resources  vs.  PetroTal Corp

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.

PetroTal Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PetroTal Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, PetroTal Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matador Resources and PetroTal Corp

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

The idea behind Matador Resources and PetroTal Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.