Correlation Between Baker Hughes and TechnipFMC PLC
Can any of the company-specific risk be diversified away by investing in both Baker Hughes and TechnipFMC PLC 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 TechnipFMC PLC 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 TechnipFMC PLC, you can compare the effects of market volatilities on Baker Hughes and TechnipFMC PLC 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 TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and TechnipFMC PLC.
Diversification Opportunities for Baker Hughes and TechnipFMC PLC
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Baker and TechnipFMC is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC 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 TechnipFMC PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC PLC has no effect on the direction of Baker Hughes i.e., Baker Hughes and TechnipFMC PLC go up and down completely randomly.
Pair Corralation between Baker Hughes and TechnipFMC PLC
Considering the 90-day investment horizon Baker Hughes is expected to generate 1.92 times less return on investment than TechnipFMC PLC. But when comparing it to its historical volatility, Baker Hughes Co is 1.31 times less risky than TechnipFMC PLC. It trades about 0.07 of its potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,176 in TechnipFMC PLC on August 27, 2024 and sell it today you would earn a total of 1,907 from holding TechnipFMC PLC or generate 162.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Hughes Co vs. TechnipFMC PLC
Performance |
| Timeline |
| Baker Hughes |
| TechnipFMC PLC |
Baker Hughes and TechnipFMC PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Hughes and TechnipFMC PLC
The main advantage of trading using opposite Baker Hughes and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, TechnipFMC PLC 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 TechnipFMC PLC will offset losses from the drop in TechnipFMC PLC'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 |
| TechnipFMC PLC vs. Oceaneering International | TechnipFMC PLC vs. NOV Inc | TechnipFMC PLC vs. Flowserve | TechnipFMC PLC vs. Core Laboratories NV |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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