Correlation Between Schlumberger and Baker Hughes

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

Diversification Opportunities for Schlumberger and Baker Hughes

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Schlumberger and Baker is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger NV 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 Schlumberger 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 Schlumberger NV 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 Schlumberger i.e., Schlumberger and Baker Hughes go up and down completely randomly.

Pair Corralation between Schlumberger and Baker Hughes

Considering the 90-day investment horizon Schlumberger NV is expected to generate 0.79 times more return on investment than Baker Hughes. However, Schlumberger NV is 1.27 times less risky than Baker Hughes. It trades about 0.1 of its potential returns per unit of risk. Baker Hughes A is currently generating about -0.22 per unit of risk. If you would invest  3,337  in Schlumberger NV on May 10, 2022 and sell it today you would earn a total of  165.00  from holding Schlumberger NV or generate 4.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.45%
ValuesDaily Returns

Schlumberger NV  vs.  Baker Hughes A

 Performance (%) 
       Timeline  
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 somewhat strong essential indicators, Schlumberger is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Schlumberger 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 sluggish 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 and Baker Hughes Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Schlumberger and Baker Hughes

The main advantage of trading using opposite Schlumberger and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schlumberger 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 Schlumberger NV 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.
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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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