Correlation Between Newpark Resources and Park Ohio

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Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Park Ohio 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 Park Ohio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Park Ohio Holdings, you can compare the effects of market volatilities on Newpark Resources and Park Ohio 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 Park Ohio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Park Ohio.

Diversification Opportunities for Newpark Resources and Park Ohio

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Newpark and Park is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Newpark Resources i.e., Newpark Resources and Park Ohio go up and down completely randomly.

Pair Corralation between Newpark Resources and Park Ohio

Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 0.81 times more return on investment than Park Ohio. However, Newpark Resources is 1.24 times less risky than Park Ohio. It trades about 0.33 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about 0.11 per unit of risk. If you would invest  673.00  in Newpark Resources on August 31, 2024 and sell it today you would earn a total of  156.00  from holding Newpark Resources or generate 23.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Newpark Resources  vs.  Park Ohio Holdings

 Performance 
       Timeline  
Newpark Resources 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Newpark Resources may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Park Ohio Holdings 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Park Ohio Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Park Ohio demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Newpark Resources and Park Ohio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Newpark Resources and Park Ohio

The main advantage of trading using opposite Newpark Resources and Park Ohio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Park Ohio 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 Park Ohio will offset losses from the drop in Park Ohio's long position.
The idea behind Newpark Resources and Park Ohio Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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