Correlation Between BCE and Newpark Resources

Can any of the company-specific risk be diversified away by investing in both BCE 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 BCE and Newpark Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BCE Inc and Newpark Resources, you can compare the effects of market volatilities on BCE 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 BCE with a short position of Newpark Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Newpark Resources.

Diversification Opportunities for BCE and Newpark Resources

-0.64

Correlation Coefficient

BCE  Newpark Resources

Excellent diversification

The 3 months correlation between BCE and Newpark is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and BCE 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 BCE Inc 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 BCE i.e., BCE and Newpark Resources go up and down completely randomly.

Pair Corralation between BCE and Newpark Resources

Considering the 90-day investment horizon BCE Inc is expected to under-perform the Newpark Resources. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 2.15 times less risky than Newpark Resources. The stock trades about -0.12 of its potential returns per unit of risk. The Newpark Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  730.00  in Newpark Resources on September 18, 2024 and sell it today you would earn a total of  36.00  from holding Newpark Resources or generate 4.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BCE Inc  vs.  Newpark Resources

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Newpark Resources

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Newpark Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BCE and Newpark Resources

The main advantage of trading using opposite BCE and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE 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.

The idea behind BCE Inc and Newpark Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.