Correlation Between Baker Hughes and Ranger Energy

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

Diversification Opportunities for Baker Hughes and Ranger Energy

0.95

Correlation Coefficient

Baker Hughes  Ranger Energy

Almost no diversification

The 3 months correlation between Baker and Ranger is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Baker Hughes Co and Ranger Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ranger Energy Services 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 Ranger Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ranger Energy Services has no effect on the direction of Baker Hughes i.e., Baker Hughes and Ranger Energy go up and down completely randomly.

Pair Corralation between Baker Hughes and Ranger Energy

Considering the 90-day investment horizon Baker Hughes is expected to generate 1.15 times less return on investment than Ranger Energy. In addition to that, Baker Hughes is 1.08 times more volatile than Ranger Energy Services. It trades about 0.15 of its total potential returns per unit of risk. Ranger Energy Services is currently generating about 0.19 per unit of volatility. If you would invest  1,222  in Ranger Energy Services on September 17, 2024 and sell it today you would earn a total of  306.00  from holding Ranger Energy Services or generate 25.04% 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.  Ranger Energy Services

Baker Hughes

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting forward-looking signals, Baker Hughes reported solid returns over the last few months and may actually be approaching a breakup point.

Ranger Energy Services

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ranger Energy Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, Ranger Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baker Hughes and Ranger Energy

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

The idea behind Baker Hughes Co and Ranger Energy Services 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.