Correlation Between Baker Hughes and Flotek Industries
Can any of the company-specific risk be diversified away by investing in both Baker Hughes and Flotek Industries 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 Flotek Industries 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 Flotek Industries, you can compare the effects of market volatilities on Baker Hughes and Flotek Industries 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 Flotek Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and Flotek Industries.
Diversification Opportunities for Baker Hughes and Flotek Industries
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Baker and Flotek is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Flotek Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flotek Industries 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 Flotek Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flotek Industries has no effect on the direction of Baker Hughes i.e., Baker Hughes and Flotek Industries go up and down completely randomly.
Pair Corralation between Baker Hughes and Flotek Industries
Considering the 90-day investment horizon Baker Hughes is expected to generate 2.95 times less return on investment than Flotek Industries. But when comparing it to its historical volatility, Baker Hughes Co is 2.21 times less risky than Flotek Industries. It trades about 0.22 of its potential returns per unit of risk. Flotek Industries is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 401.00 in Flotek Industries on September 2, 2024 and sell it today you would earn a total of 449.00 from holding Flotek Industries or generate 111.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Hughes Co vs. Flotek Industries
Performance |
| Timeline |
| Baker Hughes |
| Flotek Industries |
Baker Hughes and Flotek Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Hughes and Flotek Industries
The main advantage of trading using opposite Baker Hughes and Flotek Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, Flotek Industries 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 Flotek Industries will offset losses from the drop in Flotek Industries' long position.| Baker Hughes vs. Schlumberger NV | Baker Hughes vs. NOV Inc | Baker Hughes vs. Weatherford International PLC | Baker Hughes vs. Tenaris SA ADR |
| Flotek Industries vs. ProPetro Holding Corp | Flotek Industries vs. Liberty Oilfield Services | Flotek Industries vs. KLX Energy Services | Flotek Industries vs. MRC Global |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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