Correlation Between Schlumberger and NOW

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

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

Diversification Opportunities for Schlumberger and NOW

0.0

Correlation Coefficient

Schlumberger  NOW

Pay attention - limited upside

The 3 months correlation between Schlumberger and NOW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger Limited and NOW Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOW Inc 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 NOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOW Inc has no effect on the direction of Schlumberger i.e., Schlumberger and NOW go up and down completely randomly.

Pair Corralation between Schlumberger and NOW

Assuming the 90 days trading horizon Schlumberger Limited is expected to under-perform the NOW. In addition to that, Schlumberger is 14.09 times more volatile than NOW Inc. It trades about -0.02 of its total potential returns per unit of risk. NOW Inc is currently generating about 0.03 per unit of volatility. If you would invest  23,400  in NOW Inc on October 5, 2024 and sell it today you would earn a total of  400.00  from holding NOW Inc or generate 1.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Schlumberger Limited  vs.  NOW Inc

Schlumberger Limited

Risk-Adjusted Performance

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Very Weak

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

NOW Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOW Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, NOW is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Schlumberger and NOW

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

The idea behind Schlumberger Limited and NOW Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.