Correlation Between Newpark Resources and Primoris Services
Can any of the company-specific risk be diversified away by investing in both Newpark Resources and Primoris Services 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 Primoris Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newpark Resources and Primoris Services, you can compare the effects of market volatilities on Newpark Resources and Primoris Services 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 Primoris Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newpark Resources and Primoris Services.
Diversification Opportunities for Newpark Resources and Primoris Services
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Newpark and Primoris is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Newpark Resources and Primoris Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primoris Services 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 Primoris Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primoris Services has no effect on the direction of Newpark Resources i.e., Newpark Resources and Primoris Services go up and down completely randomly.
Pair Corralation between Newpark Resources and Primoris Services
Allowing for the 90-day total investment horizon Newpark Resources is expected to under-perform the Primoris Services. But the stock apears to be less risky and, when comparing its historical volatility, Newpark Resources is 1.5 times less risky than Primoris Services. The stock trades about -0.21 of its potential returns per unit of risk. The Primoris Services is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,274 in Primoris Services on February 1, 2024 and sell it today you would earn a total of 386.00 from holding Primoris Services or generate 9.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Newpark Resources vs. Primoris Services
Performance |
Timeline |
Newpark Resources |
Primoris Services |
Newpark Resources and Primoris Services Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Newpark Resources and Primoris Services
The main advantage of trading using opposite Newpark Resources and Primoris Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newpark Resources position performs unexpectedly, Primoris Services 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 Primoris Services will offset losses from the drop in Primoris Services' long position.Newpark Resources vs. Expro Group Holdings | Newpark Resources vs. Ranger Energy Services | Newpark Resources vs. Cactus Inc | Newpark Resources vs. MRC Global |
Primoris Services vs. Comfort Systems USA | Primoris Services vs. Granite Construction Incorporated | Primoris Services vs. Dycom Industries | Primoris Services vs. MasTec Inc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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