Correlation Between Newpark Resources and CSI Compressco

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

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

Diversification Opportunities for Newpark Resources and CSI Compressco

-0.16

Correlation Coefficient

Newpark Resources  CSI Compressco

Good diversification

The 3 months correlation between Newpark and CSI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and CSI Compressco LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSI Compressco LP 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 CSI Compressco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSI Compressco LP has no effect on the direction of Newpark Resources i.e., Newpark Resources and CSI Compressco go up and down completely randomly.

Pair Corralation between Newpark Resources and CSI Compressco

If you would invest  543.00  in Newpark Resources on September 12, 2024 and sell it today you would earn a total of  270.50  from holding Newpark Resources or generate 49.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.3%
Values	Daily Returns

Newpark Resources  vs.  CSI Compressco LP

Newpark Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Newpark Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CSI Compressco LP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Newpark Resources and CSI Compressco

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

The idea behind Newpark Resources and CSI Compressco LP 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.