Correlation Between Range Resources and Matador Resources

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

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

Diversification Opportunities for Range Resources and Matador Resources

0.82

Correlation Coefficient

Range Resources  Matador Resources

Very poor diversification

The 3 months correlation between Range and Matador is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Range Resources Corp and Matador Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matador Resources and Range 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 Range Resources Corp 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 Range Resources i.e., Range Resources and Matador Resources go up and down completely randomly.

Pair Corralation between Range Resources and Matador Resources

Considering the 90-day investment horizon Range Resources Corp is expected to generate 0.86 times more return on investment than Matador Resources. However, Range Resources Corp is 1.16 times less risky than Matador Resources. It trades about 0.46 of its potential returns per unit of risk. Matador Resources is currently generating about 0.34 per unit of risk. If you would invest  2,982  in Range Resources Corp on September 2, 2024 and sell it today you would earn a total of  592.00  from holding Range Resources Corp or generate 19.85% return on investment over 90 days.

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

Range Resources Corp  vs.  Matador Resources

Range Resources Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Range Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Matador Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matador Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Matador Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Range Resources and Matador Resources

The main advantage of trading using opposite Range Resources and Matador Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Range Resources 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 Range Resources Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.