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

0.91

Correlation Coefficient

Baker Hughes  Saipem SpA

Almost no diversification

The 3 months correlation between Baker and Saipem is 0.91. 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 Co is expected to under-perform the Saipem SpA. But the stock apears to be less risky and, when comparing its historical volatility, Baker Hughes Co is 2.64 times less risky than Saipem SpA. The stock trades about -0.07 of its potential returns per unit of risk. The Saipem SpA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  235.00  in Saipem SpA on January 25, 2024 and sell it today you would earn a total of  3.00  from holding Saipem SpA or generate 1.28% 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.  Saipem SpA

Baker Hughes

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward-looking signals, Baker Hughes may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Saipem SpA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saipem SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Saipem SpA reported solid returns over the last few months and may actually be approaching a breakup point.

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.

The idea behind Baker Hughes Co and Saipem SpA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.