Correlation Between Newpark Resources and Fiserv
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Fiserv 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 Fiserv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Fiserv Inc, you can compare the effects of market volatilities on Newpark Resources and Fiserv 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 Fiserv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Fiserv.
Diversification Opportunities for Newpark Resources and Fiserv
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Newpark and Fiserv is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Fiserv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiserv Inc 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 Fiserv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiserv Inc has no effect on the direction of Newpark Resources i.e., Newpark Resources and Fiserv go up and down completely randomly.
Pair Corralation between Newpark Resources and Fiserv
Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 1.73 times more return on investment than Fiserv. However, Newpark Resources is 1.73 times more volatile than Fiserv Inc. It trades about -0.07 of its potential returns per unit of risk. Fiserv Inc is currently generating about -0.27 per unit of risk. If you would invest 748.00 in Newpark Resources on January 20, 2024 and sell it today you would lose (20.00) from holding Newpark Resources or give up 2.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newpark Resources vs. Fiserv Inc
Performance |
| Timeline |
| Newpark Resources |
| Fiserv Inc |
Newpark Resources and Fiserv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newpark Resources and Fiserv
The main advantage of trading using opposite Newpark Resources and Fiserv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Fiserv 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 Fiserv will offset losses from the drop in Fiserv's long position.The idea behind Newpark Resources and Fiserv Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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