Correlation Between Newpark Resources and Park Ohio
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Newpark Resources vs. Park Ohio Holdings
Performance |
Timeline |
Newpark Resources |
Park Ohio Holdings |
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.Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Helix Energy Solutions |
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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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