Correlation Between Schlumberger and FibroGen

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

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

Diversification Opportunities for Schlumberger and FibroGen

-0.27

Correlation Coefficient

Schlumberger  FibroGen

Very good diversification

The 3 months correlation between Schlumberger and FibroGen is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger Limited and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen 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 FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of Schlumberger i.e., Schlumberger and FibroGen go up and down completely randomly.

Pair Corralation between Schlumberger and FibroGen

Assuming the 90 days trading horizon Schlumberger Limited is expected to under-perform the FibroGen. But the stock apears to be less risky and, when comparing its historical volatility, Schlumberger Limited is 2.94 times less risky than FibroGen. The stock trades about -0.06 of its potential returns per unit of risk. The FibroGen is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  750.00  in FibroGen on October 5, 2024 and sell it today you would earn a total of  445.00  from holding FibroGen or generate 59.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Schlumberger Limited  vs.  FibroGen

Schlumberger Limited

Risk-Adjusted Performance

0 of 100

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.

FibroGen

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Schlumberger and FibroGen

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

The idea behind Schlumberger Limited and FibroGen 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.