Correlation Between Baker Hughes and Select Energy
Can any of the company-specific risk be diversified away by investing in both Baker Hughes and Select Energy 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 Select Energy 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 Select Energy Services, you can compare the effects of market volatilities on Baker Hughes and Select Energy 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 Select Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and Select Energy.
Diversification Opportunities for Baker Hughes and Select Energy
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Baker and Select is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services 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 Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of Baker Hughes i.e., Baker Hughes and Select Energy go up and down completely randomly.
Pair Corralation between Baker Hughes and Select Energy
Considering the 90-day investment horizon Baker Hughes Co is expected to generate 0.74 times more return on investment than Select Energy. However, Baker Hughes Co is 1.36 times less risky than Select Energy. It trades about 0.03 of its potential returns per unit of risk. Select Energy Services is currently generating about -0.16 per unit of risk. If you would invest 4,346 in Baker Hughes Co on December 3, 2024 and sell it today you would earn a total of 113.00 from holding Baker Hughes Co or generate 2.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Baker Hughes Co vs. Select Energy Services
Performance |
Timeline |
Baker Hughes |
Select Energy Services |
Baker Hughes and Select Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Baker Hughes and Select Energy
The main advantage of trading using opposite Baker Hughes and Select Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, Select Energy 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 Select Energy will offset losses from the drop in Select Energy's long position.Baker Hughes vs. Schlumberger NV | Baker Hughes vs. NOV Inc | Baker Hughes vs. Weatherford International PLC | Baker Hughes vs. Tenaris SA ADR |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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