Correlation Between Newpark Resources and Hawkins

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

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

Diversification Opportunities for Newpark Resources and Hawkins

0.9

Correlation Coefficient

Newpark Resources  Hawkins

Almost no diversification

The 3 months correlation between Newpark and Hawkins is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins 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 Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Newpark Resources i.e., Newpark Resources and Hawkins go up and down completely randomly.

Pair Corralation between Newpark Resources and Hawkins

Allowing for the 90-day total investment horizon Newpark Resources is expected to under-perform the Hawkins. But the stock apears to be less risky and, when comparing its historical volatility, Newpark Resources is 1.15 times less risky than Hawkins. The stock trades about -0.24 of its potential returns per unit of risk. The Hawkins is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7,816  in Hawkins on February 5, 2024 and sell it today you would lose (156.00) from holding Hawkins or give up 2.0% of portfolio value over 90 days.

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

Newpark Resources  vs.  Hawkins

Newpark Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Newpark Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Hawkins

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward-looking signals, Hawkins displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newpark Resources and Hawkins

The main advantage of trading using opposite Newpark Resources and Hawkins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Hawkins 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 Hawkins will offset losses from the drop in Hawkins' long position.

The idea behind Newpark Resources and Hawkins 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.