Correlation Between Baker Hughes and Baker Steel

Can any of the company-specific risk be diversified away by investing in both Baker Hughes and Baker Steel 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 Baker Steel 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 Baker Steel Resources, you can compare the effects of market volatilities on Baker Hughes and Baker Steel 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 Baker Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and Baker Steel.

Diversification Opportunities for Baker Hughes and Baker Steel

0.7

Correlation Coefficient

Baker Hughes  Baker Steel

Poor diversification

The 3 months correlation between Baker and Baker is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources 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 Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of Baker Hughes i.e., Baker Hughes and Baker Steel go up and down completely randomly.

Pair Corralation between Baker Hughes and Baker Steel

Assuming the 90 days trading horizon Baker Hughes is expected to generate 1.19 times less return on investment than Baker Steel. In addition to that, Baker Hughes is 1.15 times more volatile than Baker Steel Resources. It trades about 0.12 of its total potential returns per unit of risk. Baker Steel Resources is currently generating about 0.16 per unit of volatility. If you would invest  4,850  in Baker Steel Resources on October 11, 2024 and sell it today you would earn a total of  900.00  from holding Baker Steel Resources or generate 18.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Baker Hughes Co  vs.  Baker Steel Resources

Baker Hughes

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 9 (%) 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.

Baker Steel Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Steel Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Baker Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baker Hughes and Baker Steel

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

The idea behind Baker Hughes Co and Baker Steel 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.