Correlation Between Indutrade and Baker Hughes

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

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

Diversification Opportunities for Indutrade and Baker Hughes

-0.32

Correlation Coefficient

Indutrade  Baker Hughes

Very good diversification

The 3 months correlation between Indutrade and Baker is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Baker Hughes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Hughes and Indutrade 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 Indutrade AB are associated (or correlated) with Baker Hughes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Hughes has no effect on the direction of Indutrade i.e., Indutrade and Baker Hughes go up and down completely randomly.

Pair Corralation between Indutrade and Baker Hughes

Assuming the 90 days trading horizon Indutrade is expected to generate 34.11 times less return on investment than Baker Hughes. But when comparing it to its historical volatility, Indutrade AB is 1.4 times less risky than Baker Hughes. It trades about 0.01 of its potential returns per unit of risk. Baker Hughes Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,725  in Baker Hughes Co on October 25, 2024 and sell it today you would earn a total of  886.00  from holding Baker Hughes Co or generate 23.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Indutrade AB  vs.  Baker Hughes Co

Indutrade AB

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Indutrade is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Baker Hughes

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Baker Hughes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indutrade and Baker Hughes

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

The idea behind Indutrade AB and Baker Hughes Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.