Correlation Between Baker Hughes and Nextier Oilfield

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

Diversification Opportunities for Baker Hughes and Nextier Oilfield

0.42

Correlation Coefficient

Baker Hughes  Nextier Oilfield

Very weak diversification

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

Pair Corralation between Baker Hughes and Nextier Oilfield

Considering the 90-day investment horizon Baker Hughes is expected to generate 2.77 times less return on investment than Nextier Oilfield. But when comparing it to its historical volatility, Baker Hughes Co is 2.1 times less risky than Nextier Oilfield. It trades about 0.06 of its potential returns per unit of risk. Nextier Oilfield Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  874.00  in Nextier Oilfield Solutions on October 10, 2024 and sell it today you would earn a total of  261.00  from holding Nextier Oilfield Solutions or generate 29.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	26.01%
Values	Daily Returns

Baker Hughes Co  vs.  Nextier Oilfield Solutions

Baker Hughes

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 10 (%) 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.

Nextier Oilfield Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextier Oilfield Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Nextier Oilfield is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Baker Hughes and Nextier Oilfield

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

The idea behind Baker Hughes Co and Nextier Oilfield Solutions 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.