Correlation Between Newpark Resources and Subsea 7

Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Subsea 7 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 Subsea 7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Newpark Resources and Subsea 7 SA, you can compare the effects of market volatilities on Newpark Resources and Subsea 7 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 Subsea 7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Subsea 7.

Diversification Opportunities for Newpark Resources and Subsea 7

0.59

Correlation Coefficient

Newpark Resources  Subsea 7

Very weak diversification

The 3 months correlation between Newpark and Subsea is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Subsea 7 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Subsea 7 SA 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 Subsea 7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Subsea 7 SA has no effect on the direction of Newpark Resources i.e., Newpark Resources and Subsea 7 go up and down completely randomly.

Pair Corralation between Newpark Resources and Subsea 7

If you would invest  1,220  in Subsea 7 SA on September 30, 2024 and sell it today you would earn a total of  0.00  from holding Subsea 7 SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.83%
Values	Daily Returns

Newpark Resources  vs.  Subsea 7 SA

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.

Subsea 7 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Subsea 7 SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Subsea 7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Newpark Resources and Subsea 7

The main advantage of trading using opposite Newpark Resources and Subsea 7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Subsea 7 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 Subsea 7 will offset losses from the drop in Subsea 7's long position.

The idea behind Newpark Resources and Subsea 7 SA 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.