Correlation Between China Oilfield and Baker Hughes

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

Diversification Opportunities for China Oilfield and Baker Hughes

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between China and Baker is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Oilfield Svcs 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 China Oilfield 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 China Oilfield Svcs 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 China Oilfield i.e., China Oilfield and Baker Hughes go up and down completely randomly.

Pair Corralation between China Oilfield and Baker Hughes

Assuming the 90 days horizon China Oilfield Svcs is expected to generate 1.76 times more return on investment than Baker Hughes. However, China Oilfield is 1.76 times more volatile than Baker Hughes A. It trades about 0.22 of its potential returns per unit of risk. Baker Hughes A is currently generating about -0.31 per unit of risk. If you would invest  92.00  in China Oilfield Svcs on June 26, 2022 and sell it today you would earn a total of  21.00  from holding China Oilfield Svcs or generate 22.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

China Oilfield Svcs  vs.  Baker Hughes A

 Performance (%) 
       Timeline  
China Oilfield Svcs 
China Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in China Oilfield Svcs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, China Oilfield is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

China Price Channel

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

China Oilfield and Baker Hughes Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Oilfield and Baker Hughes

The main advantage of trading using opposite China Oilfield and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Oilfield 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.
China Oilfield vs. Industrias Bachoco SA
The idea behind China Oilfield Svcs 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. Industrias Bachoco SA
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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