Correlation Between Newpark Resources and WELLS

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

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

Diversification Opportunities for Newpark Resources and WELLS

-0.41

Correlation Coefficient

Newpark Resources  WELLS

Very good diversification

The 3 months correlation between Newpark and WELLS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and WELLS FARGO BK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELLS FARGO BK 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 WELLS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELLS FARGO BK has no effect on the direction of Newpark Resources i.e., Newpark Resources and WELLS go up and down completely randomly.

Pair Corralation between Newpark Resources and WELLS

Allowing for the 90-day total investment horizon Newpark Resources is expected to generate 1.48 times more return on investment than WELLS. However, Newpark Resources is 1.48 times more volatile than WELLS FARGO BK. It trades about 0.1 of its potential returns per unit of risk. WELLS FARGO BK is currently generating about -0.08 per unit of risk. If you would invest  712.00  in Newpark Resources on September 13, 2024 and sell it today you would earn a total of  98.00  from holding Newpark Resources or generate 13.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	52.38%
Values	Daily Returns

Newpark Resources  vs.  WELLS FARGO BK

Newpark Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Newpark Resources reported solid returns over the last few months and may actually be approaching a breakup point.

WELLS FARGO BK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WELLS FARGO BK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for WELLS FARGO BK investors.

Pair Trading with Newpark Resources and WELLS

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

The idea behind Newpark Resources and WELLS FARGO BK 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.