Correlation Between Newpark Resources and Altria
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Altria 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 Altria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Altria Group, you can compare the effects of market volatilities on Newpark Resources and Altria 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 Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Altria.
Diversification Opportunities for Newpark Resources and Altria
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Newpark and Altria is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria 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 Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Newpark Resources i.e., Newpark Resources and Altria go up and down completely randomly.
Pair Corralation between Newpark Resources and Altria
Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 3.94 times more return on investment than Altria. However, Newpark Resources is 3.94 times more volatile than Altria Group. It trades about 0.4 of its potential returns per unit of risk. Altria Group is currently generating about 0.37 per unit of risk. If you would invest 657.00 in Newpark Resources on September 4, 2024 and sell it today you would earn a total of 182.00 from holding Newpark Resources or generate 27.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newpark Resources vs. Altria Group
Performance |
| Timeline |
| Newpark Resources |
| Altria Group |
Newpark Resources and Altria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newpark Resources and Altria
The main advantage of trading using opposite Newpark Resources and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Altria 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 Altria will offset losses from the drop in Altria's long position.| Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Forum Energy Technologies |
| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria vs. Philip Morris International |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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