Correlation Between Newpark Resources and Tetra Technologies
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Tetra Technologies 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 Tetra Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Tetra Technologies, you can compare the effects of market volatilities on Newpark Resources and Tetra Technologies 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 Tetra Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Tetra Technologies.
Diversification Opportunities for Newpark Resources and Tetra Technologies
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Newpark and Tetra is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Tetra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetra 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 Tetra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tetra Technologies has no effect on the direction of Newpark Resources i.e., Newpark Resources and Tetra Technologies go up and down completely randomly.
Pair Corralation between Newpark Resources and Tetra Technologies
Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 1.23 times less return on investment than Tetra Technologies. But when comparing it to its historical volatility, Newpark Resources is 1.97 times less risky than Tetra Technologies. It trades about 0.28 of its potential returns per unit of risk. Tetra Technologies is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 317.00 in Tetra Technologies on August 29, 2024 and sell it today you would earn a total of 70.00 from holding Tetra Technologies or generate 22.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newpark Resources vs. Tetra Technologies
Performance |
| Timeline |
| Newpark Resources |
| Tetra Technologies |
Newpark Resources and Tetra Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newpark Resources and Tetra Technologies
The main advantage of trading using opposite Newpark Resources and Tetra Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Tetra Technologies 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 Tetra Technologies will offset losses from the drop in Tetra Technologies' long position.| Newpark Resources vs. ProPetro Holding Corp | Newpark Resources vs. RPC Inc | Newpark Resources vs. MRC Global | Newpark Resources vs. Expro Group Holdings |
| Tetra Technologies vs. ProPetro Holding Corp | Tetra Technologies vs. RPC Inc | Tetra Technologies vs. MRC Global | Tetra Technologies vs. Expro Group Holdings |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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