Correlation Between FEDEX and Newpark Resources

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

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

Diversification Opportunities for FEDEX and Newpark Resources

-0.04

Correlation Coefficient

FEDEX  Newpark Resources

Good diversification

The 3 months correlation between FEDEX and Newpark is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding FEDEX P and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and FEDEX 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 FEDEX P 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 FEDEX i.e., FEDEX and Newpark Resources go up and down completely randomly.

Pair Corralation between FEDEX and Newpark Resources

Assuming the 90 days trading horizon FEDEX P is expected to under-perform the Newpark Resources. But the bond apears to be less risky and, when comparing its historical volatility, FEDEX P is 3.4 times less risky than Newpark Resources. The bond trades about -0.14 of its potential returns per unit of risk. The Newpark Resources is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  657.00  in Newpark Resources on September 5, 2024 and sell it today you would earn a total of  141.00  from holding Newpark Resources or generate 21.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

FEDEX P  vs.  Newpark Resources

FEDEX P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEDEX P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FEDEX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 unsteady basic indicators, Newpark Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FEDEX and Newpark Resources

The main advantage of trading using opposite FEDEX and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FEDEX 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 FEDEX P 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.