Correlation Between Baker Hughes and SOI Old

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

Diversification Opportunities for Baker Hughes and SOI Old

0.86

Correlation Coefficient

Baker Hughes  SOI Old

Very poor diversification

The 3 months correlation between Baker and SOI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and SOI Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOI Old 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 SOI Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOI Old has no effect on the direction of Baker Hughes i.e., Baker Hughes and SOI Old go up and down completely randomly.

Pair Corralation between Baker Hughes and SOI Old

If you would invest  4,121  in Baker Hughes Co on October 11, 2024 and sell it today you would earn a total of  223.00  from holding Baker Hughes Co or generate 5.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.76%
Values	Daily Returns

Baker Hughes Co  vs.  SOI Old

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.

SOI Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, SOI Old is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Baker Hughes and SOI Old

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

The idea behind Baker Hughes Co and SOI Old 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.