Correlation Between Basic Energy and Baker Hughes

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Can any of the company-specific risk be diversified away by investing in both Basic Energy 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 Basic Energy and Baker Hughes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Energy Services and Baker Hughes A, you can compare the effects of market volatilities on Basic Energy 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 Basic Energy with a short position of Baker Hughes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Energy and Baker Hughes.

Diversification Opportunities for Basic Energy and Baker Hughes

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Basic and Baker is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Basic Energy Services 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 Basic Energy 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 Basic Energy Services 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 A has no effect on the direction of Basic Energy i.e., Basic Energy and Baker Hughes go up and down completely randomly.

Pair Corralation between Basic Energy and Baker Hughes

Assuming the 90 days horizon Basic Energy Services is expected to generate 24.53 times more return on investment than Baker Hughes. However, Basic Energy is 24.53 times more volatile than Baker Hughes A. It trades about 0.05 of its potential returns per unit of risk. Baker Hughes A is currently generating about 0.05 per unit of risk. If you would invest  20.00  in Basic Energy Services on June 30, 2022 and sell it today you would lose (20.00)  from holding Basic Energy Services or give up 100.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy96.18%
ValuesDaily Returns

Basic Energy Services  vs.  Baker Hughes A

 Performance (%) 
       Timeline  
Basic Energy Services 
Basic Performance
0 of 100
Over the last 90 days Basic Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Basic Energy displayed solid returns over the last few months and may actually be approaching a breakup point.
Baker Hughes A 
Baker Performance
0 of 100
Over the last 90 days Baker Hughes A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in October 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Baker Price Channel

Basic Energy and Baker Hughes Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Basic Energy and Baker Hughes

The main advantage of trading using opposite Basic Energy and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Energy 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.
Basic Energy vs. Kibush Capital Corp
The idea behind Basic Energy Services 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.
Baker Hughes vs. Kibush Capital Corp
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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