Correlation Between Baker Hughes and NOV

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

Diversification Opportunities for Baker Hughes and NOV

0.45

Correlation Coefficient

Baker Hughes  NOV

Very weak diversification

The 3 months correlation between Baker and NOV is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc 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 NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of Baker Hughes i.e., Baker Hughes and NOV go up and down completely randomly.

Pair Corralation between Baker Hughes and NOV

Considering the 90-day investment horizon Baker Hughes is expected to generate 1.37 times less return on investment than NOV. But when comparing it to its historical volatility, Baker Hughes Co is 1.72 times less risky than NOV. It trades about 0.05 of its potential returns per unit of risk. NOV Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,473  in NOV Inc on November 28, 2024 and sell it today you would earn a total of  24.00  from holding NOV Inc or generate 1.63% 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.  NOV Inc

Baker Hughes

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Baker Hughes is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

NOV Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NOV Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, NOV is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Baker Hughes and NOV

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

The idea behind Baker Hughes Co and NOV Inc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.