Correlation Between Weatherford International and Newpark Resources

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

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

Diversification Opportunities for Weatherford International and Newpark Resources

0.28

Correlation Coefficient

Weatherford International  Newpark Resources

Modest diversification

The 3 months correlation between Weatherford and Newpark is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International Plc and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources and Weatherford International 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 Weatherford International Plc 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 Weatherford International i.e., Weatherford International and Newpark Resources go up and down completely randomly.

Pair Corralation between Weatherford International and Newpark Resources

If you would invest  100.00  in Weatherford International Plc on September 30, 2024 and sell it today you would earn a total of  0.00  from holding Weatherford International Plc or generate 0.0% return on investment over 90 days.

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

Weatherford International Plc  vs.  Newpark Resources

Weatherford International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weatherford International Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Weatherford International is not utilizing all of its potentials. The latest 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 Weatherford International and Newpark Resources

The main advantage of trading using opposite Weatherford International and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weatherford International 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 Weatherford International Plc 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.