Correlation Between Tesla and Schlumberger

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

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

Diversification Opportunities for Tesla and Schlumberger

-0.42

Correlation Coefficient

Tesla  Schlumberger

Very good diversification

The 3 months correlation between Tesla and Schlumberger is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Schlumberger go up and down completely randomly.

Pair Corralation between Tesla and Schlumberger

Assuming the 90 days trading horizon Tesla Inc is expected to generate 1.8 times more return on investment than Schlumberger. However, Tesla is 1.8 times more volatile than Schlumberger Limited. It trades about 0.08 of its potential returns per unit of risk. Schlumberger Limited is currently generating about -0.02 per unit of risk. If you would invest  251,177  in Tesla Inc on October 11, 2024 and sell it today you would earn a total of  556,045  from holding Tesla Inc or generate 221.38% return on investment over 90 days.

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

Tesla Inc  vs.  Schlumberger Limited

Tesla Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tesla showed 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. 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.

Pair Trading with Tesla and Schlumberger

The main advantage of trading using opposite Tesla and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.