Correlation Between Tetra Technologies and Newpark Resources
Can any of the company-specific risk be diversified away by investing in both Tetra Technologies 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 Tetra Technologies and Newpark Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tetra Technologies and Newpark Resources, you can compare the effects of market volatilities on Tetra Technologies 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 Tetra Technologies with a short position of Newpark Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tetra Technologies and Newpark Resources.
Diversification Opportunities for Tetra Technologies and Newpark Resources
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tetra and Newpark is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tetra Technologies and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Tetra Technologies 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 Tetra Technologies 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 Tetra Technologies i.e., Tetra Technologies and Newpark Resources go up and down completely randomly.
Pair Corralation between Tetra Technologies and Newpark Resources
Considering the 90-day investment horizon Tetra Technologies is expected to under-perform the Newpark Resources. In addition to that, Tetra Technologies is 1.44 times more volatile than Newpark Resources. It trades about -0.02 of its total potential returns per unit of risk. Newpark Resources is currently generating about 0.03 per unit of volatility. If you would invest 702.00 in Newpark Resources on August 25, 2024 and sell it today you would earn a total of 90.00 from holding Newpark Resources or generate 12.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Tetra Technologies vs. Newpark Resources
Performance |
| Timeline |
| Tetra Technologies |
| Newpark Resources |
Tetra Technologies and Newpark Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tetra Technologies and Newpark Resources
The main advantage of trading using opposite Tetra Technologies and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetra Technologies 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.| Tetra Technologies vs. Newpark Resources | Tetra Technologies vs. ProPetro Holding Corp | Tetra Technologies vs. RPC Inc | Tetra Technologies vs. MRC Global |
| Newpark Resources vs. ProPetro Holding Corp | Newpark Resources vs. RPC Inc | Newpark Resources vs. MRC Global | Newpark Resources vs. Oil States 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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