Correlation Between China Oilfield and Baker Hughes

Can any of the company-specific risk be diversified away by investing in both China Oilfield and Baker Hughes 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 China Oilfield and Baker Hughes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Oilfield Services and Baker Hughes Co, you can compare the effects of market volatilities on China Oilfield and Baker Hughes 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 China Oilfield with a short position of Baker Hughes. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Oilfield and Baker Hughes.

Diversification Opportunities for China Oilfield and Baker Hughes

-0.16

Correlation Coefficient

China Oilfield  Baker Hughes

Good diversification

The 3 months correlation between China and Baker is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding China Oilfield Services and Baker Hughes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Hughes and China Oilfield 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 China Oilfield Services are associated (or correlated) with Baker Hughes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Hughes has no effect on the direction of China Oilfield i.e., China Oilfield and Baker Hughes go up and down completely randomly.

Pair Corralation between China Oilfield and Baker Hughes

Assuming the 90 days horizon China Oilfield Services is expected to under-perform the Baker Hughes. In addition to that, China Oilfield is 1.66 times more volatile than Baker Hughes Co. It trades about -0.01 of its total potential returns per unit of risk. Baker Hughes Co is currently generating about 0.09 per unit of volatility. If you would invest  3,155  in Baker Hughes Co on September 25, 2024 and sell it today you would earn a total of  695.00  from holding Baker Hughes Co or generate 22.03% return on investment over 90 days.

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

China Oilfield Services  vs.  Baker Hughes Co

China Oilfield Services

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Oilfield Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Oilfield is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Baker Hughes

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Baker Hughes reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Oilfield and Baker Hughes

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

The idea behind China Oilfield Services and Baker Hughes Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.