Correlation Between Newpark Resources and Delek Energy
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Delek Energy 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 Delek Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Delek Energy, you can compare the effects of market volatilities on Newpark Resources and Delek Energy 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 Delek Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Delek Energy.
Diversification Opportunities for Newpark Resources and Delek Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Newpark and Delek is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Delek Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Energy 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 Delek Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Energy has no effect on the direction of Newpark Resources i.e., Newpark Resources and Delek Energy go up and down completely randomly.
Pair Corralation between Newpark Resources and Delek Energy
Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 0.99 times more return on investment than Delek Energy. However, Newpark Resources is 1.01 times less risky than Delek Energy. It trades about 0.03 of its potential returns per unit of risk. Delek Energy is currently generating about -0.04 per unit of risk. If you would invest 695.00 in Newpark Resources on August 26, 2024 and sell it today you would earn a total of 97.00 from holding Newpark Resources or generate 13.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newpark Resources vs. Delek Energy
Performance |
| Timeline |
| Newpark Resources |
| Delek Energy |
Newpark Resources and Delek Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newpark Resources and Delek Energy
The main advantage of trading using opposite Newpark Resources and Delek Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Delek Energy 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 Delek Energy will offset losses from the drop in Delek Energy's long position.| Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Forum Energy Technologies |
| Delek Energy vs. Crossamerica Partners LP | Delek Energy vs. Sunoco LP | Delek Energy vs. CVR Energy | Delek Energy vs. Phillips 66 |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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