Correlation Between Baker Hughes and Penn National
Can any of the company-specific risk be diversified away by investing in both Baker Hughes and Penn National 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 Penn National 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 Penn National Gaming, you can compare the effects of market volatilities on Baker Hughes and Penn National 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 Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and Penn National.
Diversification Opportunities for Baker Hughes and Penn National
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Baker and Penn is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Baker Hughes i.e., Baker Hughes and Penn National go up and down completely randomly.
Pair Corralation between Baker Hughes and Penn National
Assuming the 90 days horizon Baker Hughes Co is expected to generate 0.91 times more return on investment than Penn National. However, Baker Hughes Co is 1.1 times less risky than Penn National. It trades about 0.31 of its potential returns per unit of risk. Penn National Gaming is currently generating about 0.11 per unit of risk. If you would invest 3,438 in Baker Hughes Co on September 1, 2024 and sell it today you would earn a total of 668.00 from holding Baker Hughes Co or generate 19.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Baker Hughes Co vs. Penn National Gaming
Performance |
| Timeline |
| Baker Hughes |
| Penn National Gaming |
Baker Hughes and Penn National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Hughes and Penn National
The main advantage of trading using opposite Baker Hughes and Penn National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, Penn National 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 Penn National will offset losses from the drop in Penn National's long position.| Baker Hughes vs. BOSTON BEER A | Baker Hughes vs. THAI BEVERAGE | Baker Hughes vs. Autohome ADR | Baker Hughes vs. MOLSON RS BEVERAGE |
| Penn National vs. WESTLAKE CHEMICAL | Penn National vs. Marie Brizard Wine | Penn National vs. NorAm Drilling AS | Penn National vs. SEKISUI CHEMICAL |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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