Correlation Between GE Vernova and Baker Hughes

Can any of the company-specific risk be diversified away by investing in both GE Vernova 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 GE Vernova and Baker Hughes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GE Vernova LLC and Baker Hughes Co, you can compare the effects of market volatilities on GE Vernova 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 GE Vernova with a short position of Baker Hughes. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Vernova and Baker Hughes.

Diversification Opportunities for GE Vernova and Baker Hughes

-0.37

Correlation Coefficient

GE Vernova  Baker Hughes

Very good diversification

The 3 months correlation between GEV and Baker is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC and Baker Hughes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Hughes and GE Vernova 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 GE Vernova LLC 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 GE Vernova i.e., GE Vernova and Baker Hughes go up and down completely randomly.

Pair Corralation between GE Vernova and Baker Hughes

Considering the 90-day investment horizon GE Vernova LLC is expected to generate 2.45 times more return on investment than Baker Hughes. However, GE Vernova is 2.45 times more volatile than Baker Hughes Co. It trades about 0.15 of its potential returns per unit of risk. Baker Hughes Co is currently generating about 0.04 per unit of risk. If you would invest  13,125  in GE Vernova LLC on March 7, 2024 and sell it today you would earn a total of  3,179  from holding GE Vernova LLC or generate 24.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.19%
Values	Daily Returns

GE Vernova LLC  vs.  Baker Hughes Co

GE Vernova LLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Baker Hughes

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Hughes Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Baker Hughes is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GE Vernova and Baker Hughes

The main advantage of trading using opposite GE Vernova and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Vernova 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.

The idea behind GE Vernova LLC and Baker Hughes Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.