Correlation Between 784730AB9 and BAKER

Can any of the company-specific risk be diversified away by investing in both 784730AB9 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 784730AB9 and BAKER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US784730AB94 and BAKER HUGHES A, you can compare the effects of market volatilities on 784730AB9 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 784730AB9 with a short position of BAKER. Check out your portfolio center. Please also check ongoing floating volatility patterns of 784730AB9 and BAKER.

Diversification Opportunities for 784730AB9 and BAKER

-0.49

Correlation Coefficient

784730AB9  BAKER

Very good diversification

The 3 months correlation between 784730AB9 and BAKER is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding US784730AB94 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 784730AB9 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 US784730AB94 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 784730AB9 i.e., 784730AB9 and BAKER go up and down completely randomly.

Pair Corralation between 784730AB9 and BAKER

Assuming the 90 days trading horizon US784730AB94 is expected to generate 7.25 times more return on investment than BAKER. However, 784730AB9 is 7.25 times more volatile than BAKER HUGHES A. It trades about 0.24 of its potential returns per unit of risk. BAKER HUGHES A is currently generating about -0.1 per unit of risk. If you would invest  9,269  in US784730AB94 on October 3, 2024 and sell it today you would earn a total of  1,584  from holding US784730AB94 or generate 17.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	34.94%
Values	Daily Returns

US784730AB94  vs.  BAKER HUGHES A

US784730AB94

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US784730AB94 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, 784730AB9 sustained solid returns over the last few months and may actually be approaching a breakup point.

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 784730AB9 and BAKER

The main advantage of trading using opposite 784730AB9 and BAKER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 784730AB9 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 US784730AB94 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.