Correlation Between Matador Resources and NN Group

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

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

Diversification Opportunities for Matador Resources and NN Group

-0.63

Correlation Coefficient

Matador Resources  NN Group

Excellent diversification

The 3 months correlation between Matador and NNGPF is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Matador Resources and NN Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Group NV 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 NN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Group NV has no effect on the direction of Matador Resources i.e., Matador Resources and NN Group go up and down completely randomly.

Pair Corralation between Matador Resources and NN Group

Given the investment horizon of 90 days Matador Resources is expected to generate 1.96 times more return on investment than NN Group. However, Matador Resources is 1.96 times more volatile than NN Group NV. It trades about 0.1 of its potential returns per unit of risk. NN Group NV is currently generating about -0.08 per unit of risk. If you would invest  5,308  in Matador Resources on September 2, 2024 and sell it today you would earn a total of  693.00  from holding Matador Resources or generate 13.06% return on investment over 90 days.

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

Matador Resources  vs.  NN Group NV

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.

NN Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NN Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NN Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Matador Resources and NN Group

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

The idea behind Matador Resources and NN Group NV 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.