Correlation Between Newpark Resources and Weatherford International

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

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

Diversification Opportunities for Newpark Resources and Weatherford International

0.64

Correlation Coefficient

Newpark Resources  Weatherford International

Poor diversification

The 3 months correlation between Newpark and Weatherford is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Weatherford International Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weatherford International and Newpark Resources 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 Newpark Resources are associated (or correlated) with Weatherford International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weatherford International has no effect on the direction of Newpark Resources i.e., Newpark Resources and Weatherford International go up and down completely randomly.

Pair Corralation between Newpark Resources and Weatherford International

If you would invest  712.00  in Newpark Resources on September 13, 2024 and sell it today you would earn a total of  98.00  from holding Newpark Resources or generate 13.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Newpark Resources  vs.  Weatherford International Plc

Newpark Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Newpark Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Weatherford International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weatherford International Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Weatherford International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Newpark Resources and Weatherford International

The main advantage of trading using opposite Newpark Resources and Weatherford International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Weatherford International 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 Weatherford International will offset losses from the drop in Weatherford International's long position.

The idea behind Newpark Resources and Weatherford International Plc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.