Correlation Between Smart Sand and Baker Hughes

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

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

Diversification Opportunities for Smart Sand and Baker Hughes

0.42

Correlation Coefficient

Smart Sand  Baker Hughes

Very weak diversification

The 3 months correlation between Smart and Baker is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Smart Sand and Baker Hughes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Hughes and Smart Sand 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 Smart Sand 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 Smart Sand i.e., Smart Sand and Baker Hughes go up and down completely randomly.

Pair Corralation between Smart Sand and Baker Hughes

Considering the 90-day investment horizon Smart Sand is expected to under-perform the Baker Hughes. In addition to that, Smart Sand is 1.58 times more volatile than Baker Hughes Co. It trades about -0.05 of its total potential returns per unit of risk. Baker Hughes Co is currently generating about 0.02 per unit of volatility. If you would invest  4,374  in Baker Hughes Co on November 28, 2024 and sell it today you would earn a total of  30.00  from holding Baker Hughes Co or generate 0.69% return on investment over 90 days.

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

Smart Sand  vs.  Baker Hughes Co

Smart Sand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smart Sand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Baker Hughes

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Baker Hughes is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Smart Sand and Baker Hughes

The main advantage of trading using opposite Smart Sand and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Sand 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 Smart Sand 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.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.