Correlation Between Permianville Royalty and Matador Resources

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

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

Diversification Opportunities for Permianville Royalty and Matador Resources

-0.03

Correlation Coefficient

Permianville Royalty  Matador Resources

Good diversification

The 3 months correlation between Permianville and Matador is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and Matador Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matador Resources and Permianville Royalty 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 Permianville Royalty Trust are associated (or correlated) with Matador Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matador Resources has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and Matador Resources go up and down completely randomly.

Pair Corralation between Permianville Royalty and Matador Resources

Considering the 90-day investment horizon Permianville Royalty Trust is expected to generate 1.73 times more return on investment than Matador Resources. However, Permianville Royalty is 1.73 times more volatile than Matador Resources. It trades about 0.07 of its potential returns per unit of risk. Matador Resources is currently generating about -0.02 per unit of risk. If you would invest  105.00  in Permianville Royalty Trust on September 27, 2024 and sell it today you would earn a total of  28.00  from holding Permianville Royalty Trust or generate 26.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Permianville Royalty Trust  vs.  Matador Resources

Permianville Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permianville Royalty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Matador Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Matador Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Matador Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Permianville Royalty and Matador Resources

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

The idea behind Permianville Royalty Trust and Matador Resources 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.