Correlation Between Newpark Resources and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Arrow Electronics 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 Newpark Resources and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Arrow Electronics, you can compare the effects of market volatilities on Newpark Resources and Arrow Electronics 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 Newpark Resources with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Arrow Electronics.
Diversification Opportunities for Newpark Resources and Arrow Electronics
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Newpark and Arrow is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Newpark 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 Newpark Resources are associated (or correlated) with Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Newpark Resources i.e., Newpark Resources and Arrow Electronics go up and down completely randomly.
Pair Corralation between Newpark Resources and Arrow Electronics
Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 1.6 times more return on investment than Arrow Electronics. However, Newpark Resources is 1.6 times more volatile than Arrow Electronics. It trades about 0.06 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.02 per unit of risk. If you would invest 454.00 in Newpark Resources on August 31, 2024 and sell it today you would earn a total of 382.00 from holding Newpark Resources or generate 84.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newpark Resources vs. Arrow Electronics
Performance |
| Timeline |
| Newpark Resources |
| Arrow Electronics |
Newpark Resources and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newpark Resources and Arrow Electronics
The main advantage of trading using opposite Newpark Resources and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Arrow Electronics 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 Arrow Electronics will offset losses from the drop in Arrow Electronics' long position.| Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Helix Energy Solutions |
| Arrow Electronics vs. Insight Enterprises | Arrow Electronics vs. Synnex | Arrow Electronics vs. Climb Global Solutions | Arrow Electronics vs. ScanSource |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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