Correlation Between Newpark Resources and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Diageo PLC 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 Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Diageo PLC ADR, you can compare the effects of market volatilities on Newpark Resources and Diageo PLC 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Diageo PLC.
Diversification Opportunities for Newpark Resources and Diageo PLC
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Newpark and Diageo is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of Newpark Resources i.e., Newpark Resources and Diageo PLC go up and down completely randomly.
Pair Corralation between Newpark Resources and Diageo PLC
Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 2.34 times more return on investment than Diageo PLC. However, Newpark Resources is 2.34 times more volatile than Diageo PLC ADR. It trades about 0.27 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.35 per unit of risk. If you would invest 681.00 in Newpark Resources on August 28, 2024 and sell it today you would earn a total of 125.00 from holding Newpark Resources or generate 18.36% 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. Diageo PLC ADR
Performance |
| Timeline |
| Newpark Resources |
| Diageo PLC ADR |
Newpark Resources and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newpark Resources and Diageo PLC
The main advantage of trading using opposite Newpark Resources and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.| Newpark Resources vs. ProPetro Holding Corp | Newpark Resources vs. RPC Inc | Newpark Resources vs. MRC Global | Newpark Resources vs. Expro Group Holdings |
| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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