Correlation Between Trican Well and Newpark Resources

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

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

Diversification Opportunities for Trican Well and Newpark Resources

0.14

Correlation Coefficient

Trican Well  Newpark Resources

Average diversification

The 3 months correlation between Trican and Newpark is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Trican Well Service and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Trican Well 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 Trican Well Service 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 Trican Well i.e., Trican Well and Newpark Resources go up and down completely randomly.

Pair Corralation between Trican Well and Newpark Resources

Assuming the 90 days horizon Trican Well Service is expected to generate 0.72 times more return on investment than Newpark Resources. However, Trican Well Service is 1.39 times less risky than Newpark Resources. It trades about 0.01 of its potential returns per unit of risk. Newpark Resources is currently generating about -0.01 per unit of risk. If you would invest  342.00  in Trican Well Service on September 30, 2024 and sell it today you would lose (3.00) from holding Trican Well Service or give up 0.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Trican Well Service  vs.  Newpark Resources

Trican Well Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trican Well Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Trican Well is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Trican Well and Newpark Resources

The main advantage of trading using opposite Trican Well and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trican Well 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 Trican Well Service 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.