Correlation Between Baker Hughes and First CommunityPFD
Can any of the company-specific risk be diversified away by investing in both Baker Hughes and First CommunityPFD 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 First CommunityPFD 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 First Community, you can compare the effects of market volatilities on Baker Hughes and First CommunityPFD 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 First CommunityPFD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and First CommunityPFD.
Diversification Opportunities for Baker Hughes and First CommunityPFD
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baker and First is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First CommunityPFD 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 First CommunityPFD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First CommunityPFD has no effect on the direction of Baker Hughes i.e., Baker Hughes and First CommunityPFD go up and down completely randomly.
Pair Corralation between Baker Hughes and First CommunityPFD
Considering the 90-day investment horizon Baker Hughes Co is expected to generate 3.88 times more return on investment than First CommunityPFD. However, Baker Hughes is 3.88 times more volatile than First Community. It trades about 0.12 of its potential returns per unit of risk. First Community is currently generating about 0.12 per unit of risk. If you would invest 3,309 in Baker Hughes Co on August 29, 2024 and sell it today you would earn a total of 1,052 from holding Baker Hughes Co or generate 31.79% 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. First Community
Performance |
| Timeline |
| Baker Hughes |
| First CommunityPFD |
Baker Hughes and First CommunityPFD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Hughes and First CommunityPFD
The main advantage of trading using opposite Baker Hughes and First CommunityPFD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, First CommunityPFD 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 First CommunityPFD will offset losses from the drop in First CommunityPFD's long position.| Baker Hughes vs. Schlumberger NV | Baker Hughes vs. NOV Inc | Baker Hughes vs. Weatherford International PLC | Baker Hughes vs. Tenaris SA ADR |
| First CommunityPFD vs. KeyCorp | First CommunityPFD vs. Maplebear Common Stock | First CommunityPFD vs. Aquagold International | First CommunityPFD vs. Morningstar Unconstrained Allocation |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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