Correlation Between Baker Hughes and Lennar Corp

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

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

Diversification Opportunities for Baker Hughes and Lennar Corp

-0.35

Correlation Coefficient

Baker Hughes  Lennar Corp

Very good diversification

The 3 months correlation between Baker and Lennar is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Lennar Corp Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar Corp Cl and Baker Hughes 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 Baker Hughes Co are associated (or correlated) with Lennar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar Corp Cl has no effect on the direction of Baker Hughes i.e., Baker Hughes and Lennar Corp go up and down completely randomly.

Pair Corralation between Baker Hughes and Lennar Corp

Assuming the 90 days trading horizon Baker Hughes Co is expected to generate 0.95 times more return on investment than Lennar Corp. However, Baker Hughes Co is 1.05 times less risky than Lennar Corp. It trades about -0.01 of its potential returns per unit of risk. Lennar Corp Cl is currently generating about -0.56 per unit of risk. If you would invest  4,249  in Baker Hughes Co on October 6, 2024 and sell it today you would lose (26.00) from holding Baker Hughes Co or give up 0.61% of portfolio value over 90 days.

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

Baker Hughes Co  vs.  Lennar Corp Cl

Baker Hughes

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 7 (%) 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.

Lennar Corp Cl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar Corp Cl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Baker Hughes and Lennar Corp

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

The idea behind Baker Hughes Co and Lennar Corp Cl 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.