Correlation Between Baker Hughes and Saipem SpA
Can any of the company-specific risk be diversified away by investing in both Baker Hughes and Saipem SpA 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 Saipem SpA 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 Saipem SpA, you can compare the effects of market volatilities on Baker Hughes and Saipem SpA 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 Saipem SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and Saipem SpA.
Diversification Opportunities for Baker Hughes and Saipem SpA
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Baker and Saipem is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Saipem SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saipem SpA 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 Saipem SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saipem SpA has no effect on the direction of Baker Hughes i.e., Baker Hughes and Saipem SpA go up and down completely randomly.
Pair Corralation between Baker Hughes and Saipem SpA
Considering the 90-day investment horizon Baker Hughes is expected to generate 1.89 times less return on investment than Saipem SpA. But when comparing it to its historical volatility, Baker Hughes Co is 2.54 times less risky than Saipem SpA. It trades about 0.09 of its potential returns per unit of risk. Saipem SpA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 151.00 in Saipem SpA on September 2, 2024 and sell it today you would earn a total of 105.00 from holding Saipem SpA or generate 69.54% 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. Saipem SpA
Performance |
| Timeline |
| Baker Hughes |
| Saipem SpA |
Baker Hughes and Saipem SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Hughes and Saipem SpA
The main advantage of trading using opposite Baker Hughes and Saipem SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, Saipem SpA 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 Saipem SpA will offset losses from the drop in Saipem SpA'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 |
| Saipem SpA vs. Worley Parsons | Saipem SpA vs. Petrofac Ltd ADR | Saipem SpA vs. SMG Industries | Saipem SpA vs. NXT Energy Solutions |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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