Correlation Between Diageo PLC and Newpark Resources
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Newpark 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 Diageo PLC and Newpark Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC ADR and Newpark Resources, you can compare the effects of market volatilities on Diageo PLC and Newpark 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 Diageo PLC with a short position of Newpark Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Newpark Resources.
Diversification Opportunities for Diageo PLC and Newpark Resources
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Diageo and Newpark is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Diageo PLC 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 Diageo PLC ADR are associated (or correlated) with Newpark Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newpark Resources has no effect on the direction of Diageo PLC i.e., Diageo PLC and Newpark Resources go up and down completely randomly.
Pair Corralation between Diageo PLC and Newpark Resources
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Newpark Resources. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.98 times less risky than Newpark Resources. The stock trades about -0.06 of its potential returns per unit of risk. The Newpark Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 835.00 in Newpark Resources on August 31, 2024 and sell it today you would lose (6.00) from holding Newpark Resources or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Newpark Resources
Performance |
| Timeline |
| Diageo PLC ADR |
| Newpark Resources |
Diageo PLC and Newpark Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Newpark Resources
The main advantage of trading using opposite Diageo PLC and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Newpark 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 Newpark Resources will offset losses from the drop in Newpark Resources' long position.| Diageo PLC vs. Naked Wines plc | Diageo PLC vs. Andrew Peller Limited | Diageo PLC vs. Iconic Brands | Diageo PLC vs. Naked Wines plc |
| Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Helix Energy Solutions |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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