Correlation Between Newpark Resources and Exterran Corp

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Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Exterran Corp 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 Exterran Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Exterran Corp, you can compare the effects of market volatilities on Newpark Resources and Exterran Corp 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 Exterran Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Exterran Corp.

Diversification Opportunities for Newpark Resources and Exterran Corp

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between Newpark and Exterran is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Exterran Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exterran Corp 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 Exterran Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exterran Corp has no effect on the direction of Newpark Resources i.e., Newpark Resources and Exterran Corp go up and down completely randomly.

Pair Corralation between Newpark Resources and Exterran Corp

Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 0.76 times more return on investment than Exterran Corp. However, Newpark Resources is 1.32 times less risky than Exterran Corp. It trades about 0.04 of its potential returns per unit of risk. Exterran Corp is currently generating about -0.06 per unit of risk. If you would invest  474.00  in Newpark Resources on December 29, 2023 and sell it today you would earn a total of  245.00  from holding Newpark Resources or generate 51.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy22.47%
ValuesDaily Returns

Newpark Resources  vs.  Exterran Corp

 Performance 
       Timeline  
Newpark Resources 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Newpark Resources may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Exterran Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Exterran Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exterran Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Newpark Resources and Exterran Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Newpark Resources and Exterran Corp

The main advantage of trading using opposite Newpark Resources and Exterran Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Exterran Corp 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 Exterran Corp will offset losses from the drop in Exterran Corp's long position.
The idea behind Newpark Resources and Exterran Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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