Correlation Between Denbury Resources and Matador Resources

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Can any of the company-specific risk be diversified away by investing in both Denbury 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 Denbury 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 Denbury Resources and Matador Resources, you can compare the effects of market volatilities on Denbury 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 Denbury Resources with a short position of Matador Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Denbury Resources and Matador Resources.

Diversification Opportunities for Denbury Resources and Matador Resources

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Denbury and Matador is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Denbury Resources and Matador Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matador Resources and Denbury 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 Denbury Resources 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 Denbury Resources i.e., Denbury Resources and Matador Resources go up and down completely randomly.

Pair Corralation between Denbury Resources and Matador Resources

If you would invest  5,174  in Matador Resources on September 17, 2024 and sell it today you would earn a total of  436.00  from holding Matador Resources or generate 8.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy1.54%
ValuesDaily Returns

Denbury Resources  vs.  Matador Resources

 Performance 
       Timeline  
Denbury Resources 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Denbury Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Denbury Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Matador Resources 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Matador Resources are ranked lower than 5 (%) 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 January 2025.

Denbury Resources and Matador Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Denbury Resources and Matador Resources

The main advantage of trading using opposite Denbury Resources and Matador Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Denbury 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 Denbury Resources 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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