Correlation Between Dawson Geophysical and NPK International

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

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

Diversification Opportunities for Dawson Geophysical and NPK International

-0.62

Correlation Coefficient

Dawson Geophysical  NPK International

Excellent diversification

The 3 months correlation between Dawson and NPK is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dawson Geophysical and NPK International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NPK International and Dawson Geophysical 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 Dawson Geophysical are associated (or correlated) with NPK International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NPK International has no effect on the direction of Dawson Geophysical i.e., Dawson Geophysical and NPK International go up and down completely randomly.

Pair Corralation between Dawson Geophysical and NPK International

Given the investment horizon of 90 days Dawson Geophysical is expected to generate 2.14 times more return on investment than NPK International. However, Dawson Geophysical is 2.14 times more volatile than NPK International. It trades about 0.07 of its potential returns per unit of risk. NPK International is currently generating about -0.03 per unit of risk. If you would invest  141.00  in Dawson Geophysical on October 9, 2024 and sell it today you would earn a total of  6.00  from holding Dawson Geophysical or generate 4.26% return on investment over 90 days.

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

Dawson Geophysical  vs.  NPK International

Dawson Geophysical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dawson Geophysical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

NPK International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NPK International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward-looking signals, NPK International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dawson Geophysical and NPK International

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

The idea behind Dawson Geophysical and NPK International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.