Correlation Between Tidewater and Newpark Resources

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

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

Diversification Opportunities for Tidewater and Newpark Resources

-0.52

Correlation Coefficient

Tidewater  Newpark Resources

Excellent diversification

The 3 months correlation between Tidewater and Newpark is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tidewater and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Tidewater 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 Tidewater 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 Tidewater i.e., Tidewater and Newpark Resources go up and down completely randomly.

Pair Corralation between Tidewater and Newpark Resources

Considering the 90-day investment horizon Tidewater is expected to under-perform the Newpark Resources. In addition to that, Tidewater is 1.15 times more volatile than Newpark Resources. It trades about -0.23 of its total potential returns per unit of risk. Newpark Resources is currently generating about 0.05 per unit of volatility. If you would invest  734.00  in Newpark Resources on September 16, 2024 and sell it today you would earn a total of  40.00  from holding Newpark Resources or generate 5.45% return on investment over 90 days.

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

Tidewater  vs.  Newpark Resources

Tidewater

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidewater has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 Tidewater and Newpark Resources

The main advantage of trading using opposite Tidewater and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidewater 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 Tidewater 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.