Correlation Between Binah Capital and Newpark Resources

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

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

Diversification Opportunities for Binah Capital and Newpark Resources

0.44

Correlation Coefficient

Binah Capital  Newpark Resources

Very weak diversification

The 3 months correlation between Binah and Newpark is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Binah Capital Group, and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Binah Capital 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 Binah Capital Group, 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 Binah Capital i.e., Binah Capital and Newpark Resources go up and down completely randomly.

Pair Corralation between Binah Capital and Newpark Resources

Assuming the 90 days horizon Binah Capital Group, is expected to generate 10.67 times more return on investment than Newpark Resources. However, Binah Capital is 10.67 times more volatile than Newpark Resources. It trades about 0.21 of its potential returns per unit of risk. Newpark Resources is currently generating about 0.04 per unit of risk. If you would invest  3.60  in Binah Capital Group, on September 27, 2024 and sell it today you would earn a total of  7.20  from holding Binah Capital Group, or generate 200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	67.8%
Values	Daily Returns

Binah Capital Group,  vs.  Newpark Resources

Binah Capital Group,

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Binah Capital Group, are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Binah Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Newpark Resources

Risk-Adjusted Performance

3 of 100

Insignificant

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 Binah Capital and Newpark Resources

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

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.