Correlation Between Volaris and Newpark Resources

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

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

Diversification Opportunities for Volaris and Newpark Resources

-0.06

Correlation Coefficient

Volaris  Newpark Resources

Good diversification

The 3 months correlation between Volaris and Newpark is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Volaris and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Volaris 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 Volaris 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 Volaris i.e., Volaris and Newpark Resources go up and down completely randomly.

Pair Corralation between Volaris and Newpark Resources

Given the investment horizon of 90 days Volaris is expected to generate 0.91 times more return on investment than Newpark Resources. However, Volaris is 1.1 times less risky than Newpark Resources. It trades about 0.23 of its potential returns per unit of risk. Newpark Resources is currently generating about 0.05 per unit of risk. If you would invest  566.00  in Volaris on September 2, 2024 and sell it today you would earn a total of  204.00  from holding Volaris or generate 36.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Volaris  vs.  Newpark Resources

Volaris

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volaris are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Volaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Newpark Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Newpark Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Newpark Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Volaris and Newpark Resources

The main advantage of trading using opposite Volaris and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volaris 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 Volaris 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.