Correlation Between Park Ohio and Newpark Resources
Can any of the company-specific risk be diversified away by investing in both Park Ohio 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 Park Ohio and Newpark Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Park Ohio Holdings and Newpark Resources, you can compare the effects of market volatilities on Park Ohio 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 Park Ohio with a short position of Newpark Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Ohio and Newpark Resources.
Diversification Opportunities for Park Ohio and Newpark Resources
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Park and Newpark is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Park Ohio Holdings and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Park Ohio 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 Park Ohio Holdings 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 Park Ohio i.e., Park Ohio and Newpark Resources go up and down completely randomly.
Pair Corralation between Park Ohio and Newpark Resources
Given the investment horizon of 90 days Park Ohio is expected to generate 2.36 times less return on investment than Newpark Resources. In addition to that, Park Ohio is 1.24 times more volatile than Newpark Resources. It trades about 0.11 of its total potential returns per unit of risk. Newpark Resources is currently generating about 0.33 per unit of volatility. 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 |
Park Ohio Holdings vs. Newpark Resources
Performance |
| Timeline |
| Park Ohio Holdings |
| Newpark Resources |
Park Ohio and Newpark Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Park Ohio and Newpark Resources
The main advantage of trading using opposite Park Ohio and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Ohio 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.| Park Ohio vs. Hurco Companies | Park Ohio vs. Enerpac Tool Group | Park Ohio vs. China Yuchai International | Park Ohio vs. Luxfer Holdings PLC |
| Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Helix Energy Solutions |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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