Correlation Between Subsea 7 and Newpark Resources

Can any of the company-specific risk be diversified away by investing in both Subsea 7 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 Subsea 7 and Newpark Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Subsea 7 SA and Newpark Resources, you can compare the effects of market volatilities on Subsea 7 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 Subsea 7 with a short position of Newpark Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subsea 7 and Newpark Resources.

Diversification Opportunities for Subsea 7 and Newpark Resources

0.49

Correlation Coefficient

Subsea 7  Newpark Resources

Very weak diversification

The 3 months correlation between Subsea and Newpark is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Subsea 7 SA and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Subsea 7 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 Subsea 7 SA 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 Subsea 7 i.e., Subsea 7 and Newpark Resources go up and down completely randomly.

Pair Corralation between Subsea 7 and Newpark Resources

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	Weak
Accuracy	1.59%
Values	Daily Returns

Subsea 7 SA  vs.  Newpark Resources

Subsea 7 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Subsea 7 SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Subsea 7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Subsea 7 and Newpark Resources

The main advantage of trading using opposite Subsea 7 and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subsea 7 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 Subsea 7 SA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.