Correlation Between Baker Hughes and Wayside Technology

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

Diversification Opportunities for Baker Hughes and Wayside Technology

0.42

Correlation Coefficient

Baker Hughes  Wayside Technology

Very weak diversification

The 3 months correlation between Baker and Wayside is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology 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 Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of Baker Hughes i.e., Baker Hughes and Wayside Technology go up and down completely randomly.

Pair Corralation between Baker Hughes and Wayside Technology

Assuming the 90 days horizon Baker Hughes is expected to generate 2.26 times less return on investment than Wayside Technology. But when comparing it to its historical volatility, Baker Hughes Co is 1.81 times less risky than Wayside Technology. It trades about 0.08 of its potential returns per unit of risk. Wayside Technology Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,264  in Wayside Technology Group on October 22, 2024 and sell it today you would earn a total of  8,036  from holding Wayside Technology Group or generate 188.46% return on investment over 90 days.

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

Baker Hughes Co  vs.  Wayside Technology Group

Baker Hughes

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Baker Hughes reported solid returns over the last few months and may actually be approaching a breakup point.

Wayside Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baker Hughes and Wayside Technology

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

The idea behind Baker Hughes Co and Wayside Technology Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.