Correlation Between Newpark Resources and Greenway Technologies

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

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

Diversification Opportunities for Newpark Resources and Greenway Technologies

0.42

Correlation Coefficient

Newpark Resources  Greenway Technologies

Very weak diversification

The 3 months correlation between Newpark and Greenway is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Greenway Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenway Technologies 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 Greenway Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenway Technologies has no effect on the direction of Newpark Resources i.e., Newpark Resources and Greenway Technologies go up and down completely randomly.

Pair Corralation between Newpark Resources and Greenway Technologies

Allowing for the 90-day total investment horizon Newpark Resources is expected to under-perform the Greenway Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Newpark Resources is 41.76 times less risky than Greenway Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The Greenway Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Greenway Technologies on September 30, 2024 and sell it today you would earn a total of  3.00  from holding Greenway Technologies or generate 300.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.49%
Values	Daily Returns

Newpark Resources  vs.  Greenway Technologies

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 abnormal basic indicators, Newpark Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Greenway Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Greenway Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Greenway Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newpark Resources and Greenway Technologies

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

The idea behind Newpark Resources and Greenway Technologies 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.