Correlation Between Baker Hughes and National Energy

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

Diversification Opportunities for Baker Hughes and National Energy

-0.72

Correlation Coefficient

Baker Hughes  National Energy

Pay attention - limited upside

The 3 months correlation between Baker and National is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and National Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Energy Services 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 National Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Energy Services has no effect on the direction of Baker Hughes i.e., Baker Hughes and National Energy go up and down completely randomly.

Pair Corralation between Baker Hughes and National Energy

Considering the 90-day investment horizon Baker Hughes Co is expected to generate 0.72 times more return on investment than National Energy. However, Baker Hughes Co is 1.39 times less risky than National Energy. It trades about 0.21 of its potential returns per unit of risk. National Energy Services is currently generating about -0.01 per unit of risk. If you would invest  3,380  in Baker Hughes Co on August 31, 2024 and sell it today you would earn a total of  981.00  from holding Baker Hughes Co or generate 29.02% return on investment over 90 days.

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

Baker Hughes Co  vs.  National Energy Services

Baker Hughes

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, Baker Hughes reported solid returns over the last few months and may actually be approaching a breakup point.

National Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, National Energy is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Baker Hughes and National Energy

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

The idea behind Baker Hughes Co and National Energy Services 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.