Correlation Between Matador Resources and San Juan

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

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

Diversification Opportunities for Matador Resources and San Juan

0.27

Correlation Coefficient

Matador Resources  San Juan

Modest diversification

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

Pair Corralation between Matador Resources and San Juan

Given the investment horizon of 90 days Matador Resources is expected to generate 4.72 times less return on investment than San Juan. But when comparing it to its historical volatility, Matador Resources is 1.18 times less risky than San Juan. It trades about 0.05 of its potential returns per unit of risk. San Juan Basin is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  329.00  in San Juan Basin on August 30, 2024 and sell it today you would earn a total of  122.00  from holding San Juan Basin or generate 37.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Matador Resources  vs.  San Juan Basin

Matador Resources

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Matador Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Matador Resources may actually be approaching a critical reversion point that can send shares even higher in December 2024.

San Juan Basin

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in San Juan Basin are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking indicators, San Juan unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matador Resources and San Juan

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

The idea behind Matador Resources and San Juan Basin 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..