Correlation Between Steel Dynamics and Baker Hughes
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Baker Hughes 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 Steel Dynamics and Baker Hughes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Baker Hughes Co, you can compare the effects of market volatilities on Steel Dynamics and Baker Hughes 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 Steel Dynamics with a short position of Baker Hughes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Baker Hughes.
Diversification Opportunities for Steel Dynamics and Baker Hughes
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Steel and Baker is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Baker Hughes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Hughes and Steel Dynamics 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 Steel Dynamics are associated (or correlated) with Baker Hughes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Hughes has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Baker Hughes go up and down completely randomly.
Pair Corralation between Steel Dynamics and Baker Hughes
Given the investment horizon of 90 days Steel Dynamics is expected to generate 1.22 times less return on investment than Baker Hughes. In addition to that, Steel Dynamics is 1.14 times more volatile than Baker Hughes Co. It trades about 0.04 of its total potential returns per unit of risk. Baker Hughes Co is currently generating about 0.06 per unit of volatility. If you would invest 2,810 in Baker Hughes Co on September 4, 2024 and sell it today you would earn a total of 1,525 from holding Baker Hughes Co or generate 54.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.99% |
| Values | Daily Returns |
Steel Dynamics vs. Baker Hughes Co
Performance |
| Timeline |
| Steel Dynamics |
| Baker Hughes |
Steel Dynamics and Baker Hughes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Baker Hughes
The main advantage of trading using opposite Steel Dynamics and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Baker Hughes 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 Baker Hughes will offset losses from the drop in Baker Hughes' long position.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
| Baker Hughes vs. Samsung Electronics Co | Baker Hughes vs. Samsung Electronics Co | Baker Hughes vs. Hyundai Motor | Baker Hughes vs. Toyota Motor Corp |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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