Correlation Between Baker Hughes and Oceaneering International

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

Diversification Opportunities for Baker Hughes and Oceaneering International

0.82

Correlation Coefficient

Baker Hughes  Oceaneering International

Very poor diversification

The 3 months correlation between Baker and Oceaneering is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Oceaneering International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oceaneering International 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 Oceaneering International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oceaneering International has no effect on the direction of Baker Hughes i.e., Baker Hughes and Oceaneering International go up and down completely randomly.

Pair Corralation between Baker Hughes and Oceaneering International

Considering the 90-day investment horizon Baker Hughes Co is expected to generate 0.67 times more return on investment than Oceaneering International. However, Baker Hughes Co is 1.49 times less risky than Oceaneering International. It trades about 0.18 of its potential returns per unit of risk. Oceaneering International is currently generating about 0.07 per unit of risk. If you would invest  3,497  in Baker Hughes Co on August 30, 2024 and sell it today you would earn a total of  864.00  from holding Baker Hughes Co or generate 24.71% return on investment over 90 days.

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

Baker Hughes Co  vs.  Oceaneering International

Baker Hughes

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 14 (%) 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.

Oceaneering International

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oceaneering International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Oceaneering International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baker Hughes and Oceaneering International

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

The idea behind Baker Hughes Co and Oceaneering International 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 Transaction History module to view history of all your transactions and understand their impact on performance.