Correlation Between Cactus and Baker Hughes

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

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

Diversification Opportunities for Cactus and Baker Hughes

0.33

Correlation Coefficient

Cactus  Baker Hughes

Weak diversification

The 3 months correlation between Cactus and Baker is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and Baker Hughes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Hughes and Cactus 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 Cactus Inc 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 Cactus i.e., Cactus and Baker Hughes go up and down completely randomly.

Pair Corralation between Cactus and Baker Hughes

Considering the 90-day investment horizon Cactus Inc is expected to under-perform the Baker Hughes. In addition to that, Cactus is 1.19 times more volatile than Baker Hughes Co. It trades about -0.13 of its total potential returns per unit of risk. Baker Hughes Co is currently generating about 0.11 per unit of volatility. If you would invest  4,060  in Baker Hughes Co on December 27, 2024 and sell it today you would earn a total of  458.00  from holding Baker Hughes Co or generate 11.28% return on investment over 90 days.

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

Cactus Inc  vs.  Baker Hughes Co

Cactus Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cactus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Baker Hughes

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, Baker Hughes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cactus and Baker Hughes

The main advantage of trading using opposite Cactus and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cactus 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 Cactus Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.