Correlation Between Baker Hughes and Schlumberger

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Can any of the company-specific risk be diversified away by investing in both Baker Hughes and Schlumberger 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 Hughes and Schlumberger 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 Schlumberger NV, you can compare the effects of market volatilities on Baker Hughes and Schlumberger 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 Hughes with a short position of Schlumberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and Schlumberger.

Diversification Opportunities for Baker Hughes and Schlumberger

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Baker and Schlumberger is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes A and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and Baker Hughes 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 Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger NV has no effect on the direction of Baker Hughes i.e., Baker Hughes and Schlumberger go up and down completely randomly.

Pair Corralation between Baker Hughes and Schlumberger

Considering the 90-day investment horizon Baker Hughes A is expected to under-perform the Schlumberger. But the stock apears to be less risky and, when comparing its historical volatility, Baker Hughes A is 1.13 times less risky than Schlumberger. The stock trades about -0.15 of its potential returns per unit of risk. The Schlumberger NV is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,152  in Schlumberger NV on May 16, 2022 and sell it today you would lose (438.00)  from holding Schlumberger NV or give up 10.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy97.67%
ValuesDaily Returns

Baker Hughes A  vs.  Schlumberger NV

 Performance (%) 
       Timeline  
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 fragile performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in September 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Baker Price Channel

Schlumberger NV 
Schlumberger Performance
0 of 100
Over the last 90 days Schlumberger NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Schlumberger Price Channel

Baker Hughes and Schlumberger Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Baker Hughes and Schlumberger

The main advantage of trading using opposite Baker Hughes and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, Schlumberger 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 Schlumberger will offset losses from the drop in Schlumberger's long position.
The idea behind Baker Hughes A and Schlumberger NV 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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