Correlation Between Newpark Resources and EMCOR
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and EMCOR 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 EMCOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and EMCOR Group, you can compare the effects of market volatilities on Newpark Resources and EMCOR 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 EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and EMCOR.
Diversification Opportunities for Newpark Resources and EMCOR
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Newpark and EMCOR is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group 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 EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of Newpark Resources i.e., Newpark Resources and EMCOR go up and down completely randomly.
Pair Corralation between Newpark Resources and EMCOR
Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 1.75 times less return on investment than EMCOR. In addition to that, Newpark Resources is 1.41 times more volatile than EMCOR Group. It trades about 0.06 of its total potential returns per unit of risk. EMCOR Group is currently generating about 0.15 per unit of volatility. If you would invest 14,407 in EMCOR Group on August 31, 2024 and sell it today you would earn a total of 36,605 from holding EMCOR Group or generate 254.08% 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. EMCOR Group
Performance |
| Timeline |
| Newpark Resources |
| EMCOR Group |
Newpark Resources and EMCOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newpark Resources and EMCOR
The main advantage of trading using opposite Newpark Resources and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, EMCOR 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 EMCOR will offset losses from the drop in EMCOR's long position.| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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