Correlation Between Newpark Resources and Jeld Wen

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

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

Diversification Opportunities for Newpark Resources and Jeld Wen

0.53

Correlation Coefficient

Newpark Resources  Jeld Wen

Very weak diversification

The 3 months correlation between Newpark and Jeld is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Jeld Wen Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeld Wen Holding 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 Jeld Wen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeld Wen Holding has no effect on the direction of Newpark Resources i.e., Newpark Resources and Jeld Wen go up and down completely randomly.

Pair Corralation between Newpark Resources and Jeld Wen

Allowing for the 90-day total investment horizon Newpark Resources is expected to under-perform the Jeld Wen. But the stock apears to be less risky and, when comparing its historical volatility, Newpark Resources is 2.28 times less risky than Jeld Wen. The stock trades about -0.21 of its potential returns per unit of risk. The Jeld Wen Holding is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,118  in Jeld Wen Holding on February 1, 2024 and sell it today you would lose (68.00) from holding Jeld Wen Holding or give up 3.21% of portfolio value over 90 days.

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

Newpark Resources  vs.  Jeld Wen Holding

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 unfluctuating basic indicators, Newpark Resources may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Jeld Wen Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jeld Wen Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Jeld Wen may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Newpark Resources and Jeld Wen

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

The idea behind Newpark Resources and Jeld Wen Holding 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.