Correlation Between Phillips and Newpark Resources
Can any of the company-specific risk be diversified away by investing in both Phillips 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 Phillips and Newpark Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Phillips 66 and Newpark Resources, you can compare the effects of market volatilities on Phillips 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 Phillips with a short position of Newpark Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and Newpark Resources.
Diversification Opportunities for Phillips and Newpark Resources
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Phillips and Newpark is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Phillips 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 Phillips 66 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 Phillips i.e., Phillips and Newpark Resources go up and down completely randomly.
Pair Corralation between Phillips and Newpark Resources
Considering the 90-day investment horizon Phillips 66 is expected to generate 0.95 times more return on investment than Newpark Resources. However, Phillips 66 is 1.05 times less risky than Newpark Resources. It trades about 0.05 of its potential returns per unit of risk. Newpark Resources is currently generating about 0.0 per unit of risk. If you would invest 15,646 in Phillips 66 on January 25, 2024 and sell it today you would earn a total of 238.00 from holding Phillips 66 or generate 1.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Phillips 66 vs. Newpark Resources
Performance |
| Timeline |
| Phillips 66 |
| Newpark Resources |
Phillips and Newpark Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Phillips and Newpark Resources
The main advantage of trading using opposite Phillips and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips 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 Phillips 66 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.| Newpark Resources vs. Expro Group Holdings | Newpark Resources vs. MRC Global | Newpark Resources vs. Now Inc |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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