Correlation Between Now and Schlumberger

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

By analyzing existing cross correlation between Now Inc and Schlumberger NV, you can compare the effects of market volatilities on Now and Schlumberger 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 Now with a short position of Schlumberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and Schlumberger.

Diversification Opportunities for Now and Schlumberger

0.5

Correlation Coefficient

Now  Schlumberger

Very weak diversification

The 3 months correlation between Now and Schlumberger is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and Now 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 Now Inc are associated (or correlated) with Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger NV has no effect on the direction of Now i.e., Now and Schlumberger go up and down completely randomly.

Pair Corralation between Now and Schlumberger

Given the investment horizon of 90 days Now Inc is expected to generate 1.91 times more return on investment than Schlumberger. However, Now is 1.91 times more volatile than Schlumberger NV. It trades about 0.15 of its potential returns per unit of risk. Schlumberger NV is currently generating about 0.11 per unit of risk. If you would invest  1,291  in Now Inc on December 29, 2024 and sell it today you would earn a total of  414.00  from holding Now Inc or generate 32.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Now Inc  vs.  Schlumberger NV

Now Inc

Risk-Adjusted Performance

Good

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

Schlumberger NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schlumberger NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Schlumberger may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Now and Schlumberger

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

The idea behind Now Inc and Schlumberger NV 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.