Correlation Between Baker Hughes and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Baker Hughes and Arrow Electronics 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 Arrow Electronics 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 Arrow Electronics, you can compare the effects of market volatilities on Baker Hughes and Arrow Electronics 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 Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and Arrow Electronics.
Diversification Opportunities for Baker Hughes and Arrow Electronics
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Baker and Arrow is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics 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 Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Baker Hughes i.e., Baker Hughes and Arrow Electronics go up and down completely randomly.
Pair Corralation between Baker Hughes and Arrow Electronics
Assuming the 90 days trading horizon Baker Hughes Co is expected to generate 1.06 times more return on investment than Arrow Electronics. However, Baker Hughes is 1.06 times more volatile than Arrow Electronics. It trades about 0.13 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.02 per unit of risk. If you would invest 3,149 in Baker Hughes Co on September 13, 2024 and sell it today you would earn a total of 1,088 from holding Baker Hughes Co or generate 34.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Hughes Co vs. Arrow Electronics
Performance |
| Timeline |
| Baker Hughes |
| Arrow Electronics |
Baker Hughes and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Hughes and Arrow Electronics
The main advantage of trading using opposite Baker Hughes and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, Arrow Electronics 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 Arrow Electronics will offset losses from the drop in Arrow Electronics' long position.| Baker Hughes vs. Samsung Electronics Co | Baker Hughes vs. Samsung Electronics Co | Baker Hughes vs. Hyundai Motor | Baker Hughes vs. Reliance Industries Ltd |
| Arrow Electronics vs. PPHE Hotel Group | Arrow Electronics vs. Vitec Software Group | Arrow Electronics vs. UNIQA Insurance Group | Arrow Electronics vs. Naked Wines plc |
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 the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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