Correlation Between Baker Hughes and Texas Gulf

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

Diversification Opportunities for Baker Hughes and Texas Gulf

-0.66

Correlation Coefficient

Baker Hughes  Texas Gulf

Excellent diversification

The 3 months correlation between Baker and Texas is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Texas Gulf Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Gulf Energy 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 Texas Gulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Gulf Energy has no effect on the direction of Baker Hughes i.e., Baker Hughes and Texas Gulf go up and down completely randomly.

Pair Corralation between Baker Hughes and Texas Gulf

Considering the 90-day investment horizon Baker Hughes Co is expected to generate 0.98 times more return on investment than Texas Gulf. However, Baker Hughes Co is 1.02 times less risky than Texas Gulf. It trades about 0.13 of its potential returns per unit of risk. Texas Gulf Energy is currently generating about 0.02 per unit of risk. If you would invest  3,743  in Baker Hughes Co on October 14, 2024 and sell it today you would earn a total of  583.00  from holding Baker Hughes Co or generate 15.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Baker Hughes Co  vs.  Texas Gulf Energy

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.

Texas Gulf Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Gulf Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Texas Gulf is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Baker Hughes and Texas Gulf

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

The idea behind Baker Hughes Co and Texas Gulf Energy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.