Correlation Between Global Engine and Newpark Resources

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

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

Diversification Opportunities for Global Engine and Newpark Resources

-0.65

Correlation Coefficient

Global Engine  Newpark Resources

Excellent diversification

The 3 months correlation between Global and Newpark is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Global Engine Group and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Global Engine 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 Global Engine Group 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 Global Engine i.e., Global Engine and Newpark Resources go up and down completely randomly.

Pair Corralation between Global Engine and Newpark Resources

Considering the 90-day investment horizon Global Engine Group is expected to under-perform the Newpark Resources. In addition to that, Global Engine is 3.33 times more volatile than Newpark Resources. It trades about -0.14 of its total potential returns per unit of risk. Newpark Resources is currently generating about 0.1 per unit of volatility. If you would invest  666.00  in Newpark Resources on October 1, 2024 and sell it today you would earn a total of  59.00  from holding Newpark Resources or generate 8.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	83.33%
Values	Daily Returns

Global Engine Group  vs.  Newpark Resources

Global Engine Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Engine Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Newpark Resources

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Newpark Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Newpark Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Global Engine and Newpark Resources

The main advantage of trading using opposite Global Engine and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Engine 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 Global Engine Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.