Correlation Between Baker Hughes and Nine Energy

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

By analyzing existing cross correlation between Baker Hughes Co and Nine Energy Service, you can compare the effects of market volatilities on Baker Hughes and Nine Energy 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 Nine Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and Nine Energy.

Diversification Opportunities for Baker Hughes and Nine Energy

0.64

Correlation Coefficient

Baker Hughes  Nine Energy

Poor diversification

The 3 months correlation between Baker and Nine is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Nine Energy Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nine Energy Service 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 Co are associated (or correlated) with Nine Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nine Energy Service has no effect on the direction of Baker Hughes i.e., Baker Hughes and Nine Energy go up and down completely randomly.

Pair Corralation between Baker Hughes and Nine Energy

Considering the 90-day investment horizon Baker Hughes Co is expected to under-perform the Nine Energy. But the stock apears to be less risky and, when comparing its historical volatility, Baker Hughes Co is 4.68 times less risky than Nine Energy. The stock trades about -0.07 of its potential returns per unit of risk. The Nine Energy Service is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Nine Energy Service on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Nine Energy Service or generate 0.85% return on investment over 90 days.

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

Baker Hughes Co  vs.  Nine Energy Service

Baker Hughes

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, Baker Hughes reported solid returns over the last few months and may actually be approaching a breakup point.

Nine Energy Service

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nine Energy Service are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Nine Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baker Hughes and Nine Energy

The main advantage of trading using opposite Baker Hughes and Nine Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, Nine Energy 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 Nine Energy will offset losses from the drop in Nine Energy's long position.

The idea behind Baker Hughes Co and Nine Energy Service 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.