Correlation Between QS Energy and Newpark Resources

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

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

Diversification Opportunities for QS Energy and Newpark Resources

-0.72

Correlation Coefficient

QS Energy  Newpark Resources

Pay attention - limited upside

The 3 months correlation between QSEP and Newpark is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding QS Energy and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and QS Energy 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 QS Energy 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 QS Energy i.e., QS Energy and Newpark Resources go up and down completely randomly.

Pair Corralation between QS Energy and Newpark Resources

Given the investment horizon of 90 days QS Energy is expected to generate 5.66 times more return on investment than Newpark Resources. However, QS Energy is 5.66 times more volatile than Newpark Resources. It trades about 0.08 of its potential returns per unit of risk. Newpark Resources is currently generating about -0.01 per unit of risk. If you would invest  5.00  in QS Energy on January 24, 2024 and sell it today you would earn a total of  0.40  from holding QS Energy or generate 8.0% return on investment over 90 days.

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

QS Energy  vs.  Newpark Resources

QS Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in QS Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, QS Energy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Newpark Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Newpark Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with QS Energy and Newpark Resources

The main advantage of trading using opposite QS Energy and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QS Energy 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 QS Energy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.