Correlation Between Oil States and Newpark Resources
Can any of the company-specific risk be diversified away by investing in both Oil States and Newpark Resources 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 Oil States and Newpark Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil States International and Newpark Resources, you can compare the effects of market volatilities on Oil States and Newpark Resources 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 Oil States with a short position of Newpark Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil States and Newpark Resources.
Diversification Opportunities for Oil States and Newpark Resources
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oil and Newpark is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Oil States International and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Oil States 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 Oil States International are associated (or correlated) with Newpark Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newpark Resources has no effect on the direction of Oil States i.e., Oil States and Newpark Resources go up and down completely randomly.
Pair Corralation between Oil States and Newpark Resources
Considering the 90-day investment horizon Oil States is expected to generate 5.89 times less return on investment than Newpark Resources. In addition to that, Oil States is 1.2 times more volatile than Newpark Resources. It trades about 0.01 of its total potential returns per unit of risk. Newpark Resources is currently generating about 0.07 per unit of volatility. If you would invest 398.00 in Newpark Resources on August 27, 2024 and sell it today you would earn a total of 394.00 from holding Newpark Resources or generate 98.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil States International vs. Newpark Resources
Performance |
| Timeline |
| Oil States International |
| Newpark Resources |
Oil States and Newpark Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil States and Newpark Resources
The main advantage of trading using opposite Oil States and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil States position performs unexpectedly, Newpark Resources 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 Newpark Resources will offset losses from the drop in Newpark Resources' long position.| Oil States vs. ProPetro Holding Corp | Oil States vs. RPC Inc | Oil States vs. MRC Global | Oil States vs. Expro Group Holdings |
| Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Forum Energy Technologies |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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