Correlation Between Newpark Resources and Forum Energy
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Forum 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 Forum 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 Forum Energy Technologies, you can compare the effects of market volatilities on Newpark Resources and Forum 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 Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Forum Energy.
Diversification Opportunities for Newpark Resources and Forum Energy
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Newpark and Forum is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Forum Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Technologies 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 Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Technologies has no effect on the direction of Newpark Resources i.e., Newpark Resources and Forum Energy go up and down completely randomly.
Pair Corralation between Newpark Resources and Forum Energy
Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 0.97 times more return on investment than Forum Energy. However, Newpark Resources is 1.03 times less risky than Forum Energy. It trades about 0.06 of its potential returns per unit of risk. Forum Energy Technologies is currently generating about -0.04 per unit of risk. If you would invest 409.00 in Newpark Resources on August 23, 2024 and sell it today you would earn a total of 368.00 from holding Newpark Resources or generate 89.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newpark Resources vs. Forum Energy Technologies
Performance |
| Timeline |
| Newpark Resources |
| Forum Energy Technologies |
Newpark Resources and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newpark Resources and Forum Energy
The main advantage of trading using opposite Newpark Resources and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Forum 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 Forum Energy will offset losses from the drop in Forum Energy's long position.| Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Forum Energy Technologies |
| Forum Energy vs. Natural Gas Services | Forum Energy vs. Enerflex | Forum Energy vs. Now Inc | Forum Energy vs. Newpark Resources |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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