Correlation Between Trade Desk and Schlumberger

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

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

Diversification Opportunities for Trade Desk and Schlumberger

0.32

Correlation Coefficient

Trade Desk  Schlumberger

Weak diversification

The 3 months correlation between Trade and Schlumberger is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited and Trade Desk 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 The Trade Desk 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 Limited has no effect on the direction of Trade Desk i.e., Trade Desk and Schlumberger go up and down completely randomly.

Pair Corralation between Trade Desk and Schlumberger

Assuming the 90 days trading horizon The Trade Desk is expected to generate 1.59 times more return on investment than Schlumberger. However, Trade Desk is 1.59 times more volatile than Schlumberger Limited. It trades about 0.07 of its potential returns per unit of risk. Schlumberger Limited is currently generating about -0.08 per unit of risk. If you would invest  708.00  in The Trade Desk on October 7, 2024 and sell it today you would earn a total of  47.00  from holding The Trade Desk or generate 6.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.37%
Values	Daily Returns

The Trade Desk  vs.  Schlumberger Limited

Trade Desk

Risk-Adjusted Performance

11 of 100

Good

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

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. Despite somewhat strong fundamental drivers, Schlumberger is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Trade Desk and Schlumberger

The main advantage of trading using opposite Trade Desk and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk 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 The Trade Desk and Schlumberger Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.