Correlation Between Newpark Resources and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Scandinavian Tobacco 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 Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Newpark Resources and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Scandinavian Tobacco.
Diversification Opportunities for Newpark Resources and Scandinavian Tobacco
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Newpark and Scandinavian is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Newpark Resources i.e., Newpark Resources and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Newpark Resources and Scandinavian Tobacco
Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 2.47 times more return on investment than Scandinavian Tobacco. However, Newpark Resources is 2.47 times more volatile than Scandinavian Tobacco Group. It trades about 0.4 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.29 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newpark Resources vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Newpark Resources |
| Scandinavian Tobacco |
Newpark Resources and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newpark Resources and Scandinavian Tobacco
The main advantage of trading using opposite Newpark Resources and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Forum Energy Technologies |
| Scandinavian Tobacco vs. Universal | Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. Japan Tobacco ADR | Scandinavian Tobacco 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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