Correlation Between Joint Stock and BAKER

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

By analyzing existing cross correlation between Joint Stock and BAKER HUGHES A, you can compare the effects of market volatilities on Joint Stock and BAKER 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 Joint Stock with a short position of BAKER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Joint Stock and BAKER.

Diversification Opportunities for Joint Stock and BAKER

0.2

Correlation Coefficient

Joint Stock  BAKER

Modest diversification

The 3 months correlation between Joint and BAKER is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Joint Stock and BAKER HUGHES A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAKER HUGHES A and Joint Stock 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 Joint Stock are associated (or correlated) with BAKER. 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 A has no effect on the direction of Joint Stock i.e., Joint Stock and BAKER go up and down completely randomly.

Pair Corralation between Joint Stock and BAKER

Given the investment horizon of 90 days Joint Stock is expected to under-perform the BAKER. In addition to that, Joint Stock is 1.47 times more volatile than BAKER HUGHES A. It trades about -0.17 of its total potential returns per unit of risk. BAKER HUGHES A is currently generating about 0.01 per unit of volatility. If you would invest  8,036  in BAKER HUGHES A on October 7, 2024 and sell it today you would earn a total of  22.00  from holding BAKER HUGHES A or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.49%
Values	Daily Returns

Joint Stock  vs.  BAKER HUGHES A

Joint Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

BAKER HUGHES A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAKER HUGHES A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BAKER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Joint Stock and BAKER

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

The idea behind Joint Stock and BAKER HUGHES A 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.