Correlation Between Schlumberger and Valaris

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

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

Diversification Opportunities for Schlumberger and Valaris

0.63

Correlation Coefficient

Schlumberger  Valaris

Poor diversification

The 3 months correlation between Schlumberger and Valaris is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger NV and Valaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valaris 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 NV are associated (or correlated) with Valaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valaris has no effect on the direction of Schlumberger i.e., Schlumberger and Valaris go up and down completely randomly.

Pair Corralation between Schlumberger and Valaris

Considering the 90-day investment horizon Schlumberger NV is expected to under-perform the Valaris. But the stock apears to be less risky and, when comparing its historical volatility, Schlumberger NV is 1.79 times less risky than Valaris. The stock trades about -0.43 of its potential returns per unit of risk. The Valaris is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  4,600  in Valaris on September 27, 2024 and sell it today you would lose (487.00) from holding Valaris or give up 10.59% of portfolio value over 90 days.

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

Schlumberger NV  vs.  Valaris

Schlumberger NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schlumberger NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Valaris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valaris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Schlumberger and Valaris

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

The idea behind Schlumberger NV and Valaris 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.