Correlation Between Baker Hughes and Eidesvik Offshore

Can any of the company-specific risk be diversified away by investing in both Baker Hughes and Eidesvik Offshore 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 Eidesvik Offshore 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 Eidesvik Offshore ASA, you can compare the effects of market volatilities on Baker Hughes and Eidesvik Offshore 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 Eidesvik Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Hughes and Eidesvik Offshore.

Diversification Opportunities for Baker Hughes and Eidesvik Offshore

-0.7

Correlation Coefficient

Baker Hughes  Eidesvik Offshore

Excellent diversification

The 3 months correlation between Baker and Eidesvik is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Eidesvik Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eidesvik Offshore ASA 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 Eidesvik Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eidesvik Offshore ASA has no effect on the direction of Baker Hughes i.e., Baker Hughes and Eidesvik Offshore go up and down completely randomly.

Pair Corralation between Baker Hughes and Eidesvik Offshore

Assuming the 90 days horizon Baker Hughes Co is expected to under-perform the Eidesvik Offshore. In addition to that, Baker Hughes is 1.06 times more volatile than Eidesvik Offshore ASA. It trades about -0.28 of its total potential returns per unit of risk. Eidesvik Offshore ASA is currently generating about -0.13 per unit of volatility. If you would invest  112.00  in Eidesvik Offshore ASA on September 22, 2024 and sell it today you would lose (4.00) from holding Eidesvik Offshore ASA or give up 3.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Baker Hughes Co  vs.  Eidesvik Offshore ASA

Baker Hughes

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Baker Hughes reported solid returns over the last few months and may actually be approaching a breakup point.

Eidesvik Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eidesvik Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Baker Hughes and Eidesvik Offshore

The main advantage of trading using opposite Baker Hughes and Eidesvik Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Hughes position performs unexpectedly, Eidesvik Offshore 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 Eidesvik Offshore will offset losses from the drop in Eidesvik Offshore's long position.

The idea behind Baker Hughes Co and Eidesvik Offshore ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.