Correlation Between BAKER and Hurco Companies

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

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

Diversification Opportunities for BAKER and Hurco Companies

0.14

Correlation Coefficient

BAKER  Hurco Companies

Average diversification

The 3 months correlation between BAKER and Hurco is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding BAKER HUGHES A and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies and BAKER 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 A are associated (or correlated) with Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of BAKER i.e., BAKER and Hurco Companies go up and down completely randomly.

Pair Corralation between BAKER and Hurco Companies

Assuming the 90 days trading horizon BAKER HUGHES A is expected to under-perform the Hurco Companies. But the bond apears to be less risky and, when comparing its historical volatility, BAKER HUGHES A is 8.53 times less risky than Hurco Companies. The bond trades about -0.1 of its potential returns per unit of risk. The Hurco Companies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,738  in Hurco Companies on October 3, 2024 and sell it today you would earn a total of  191.00  from holding Hurco Companies or generate 10.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.81%
Values	Daily Returns

BAKER HUGHES A  vs.  Hurco Companies

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.

Hurco Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hurco Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Hurco Companies 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 and Hurco Companies

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

The idea behind BAKER HUGHES A and Hurco Companies 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.