Correlation Between Schlumberger and BW OFFSHORE

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

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

Diversification Opportunities for Schlumberger and BW OFFSHORE

0.54

Correlation Coefficient

Schlumberger  BW OFFSHORE

Very weak diversification

The 3 months correlation between Schlumberger and XY81 is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger Limited and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD and Schlumberger 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 Schlumberger Limited are associated (or correlated) with BW OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW OFFSHORE LTD has no effect on the direction of Schlumberger i.e., Schlumberger and BW OFFSHORE go up and down completely randomly.

Pair Corralation between Schlumberger and BW OFFSHORE

Assuming the 90 days horizon Schlumberger Limited is expected to generate 0.8 times more return on investment than BW OFFSHORE. However, Schlumberger Limited is 1.25 times less risky than BW OFFSHORE. It trades about 0.05 of its potential returns per unit of risk. BW OFFSHORE LTD is currently generating about 0.03 per unit of risk. If you would invest  3,933  in Schlumberger Limited on September 2, 2024 and sell it today you would earn a total of  237.00  from holding Schlumberger Limited or generate 6.03% return on investment over 90 days.

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

Schlumberger Limited  vs.  BW OFFSHORE LTD

Schlumberger Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schlumberger Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Schlumberger may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BW OFFSHORE LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BW OFFSHORE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Schlumberger and BW OFFSHORE

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

The idea behind Schlumberger Limited and BW OFFSHORE LTD 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.