Correlation Between Cumulus Media and Newpark Resources

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

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

Diversification Opportunities for Cumulus Media and Newpark Resources

-0.74

Correlation Coefficient

Cumulus Media  Newpark Resources

Pay attention - limited upside

The 3 months correlation between Cumulus and Newpark is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cumulus Media Class and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Cumulus Media 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 Cumulus Media Class 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 Cumulus Media i.e., Cumulus Media and Newpark Resources go up and down completely randomly.

Pair Corralation between Cumulus Media and Newpark Resources

Given the investment horizon of 90 days Cumulus Media Class is expected to under-perform the Newpark Resources. In addition to that, Cumulus Media is 2.44 times more volatile than Newpark Resources. It trades about -0.18 of its total potential returns per unit of risk. Newpark Resources is currently generating about -0.21 per unit of volatility. If you would invest  754.00  in Newpark Resources on February 3, 2024 and sell it today you would lose (52.00) from holding Newpark Resources or give up 6.9% of portfolio value over 90 days.

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

Cumulus Media Class  vs.  Newpark Resources

Cumulus Media Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cumulus Media Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Newpark Resources

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 11 (%) 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 Cumulus Media and Newpark Resources

The main advantage of trading using opposite Cumulus Media and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumulus Media 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 Cumulus Media Class 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.