Correlation Between Weatherford International and Schlumberger

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

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

Diversification Opportunities for Weatherford International and Schlumberger

0.51

Correlation Coefficient

Weatherford International  Schlumberger

Very weak diversification

The 3 months correlation between Weatherford and Schlumberger is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International PLC and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and Weatherford International 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 Weatherford International PLC 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 NV has no effect on the direction of Weatherford International i.e., Weatherford International and Schlumberger go up and down completely randomly.

Pair Corralation between Weatherford International and Schlumberger

Given the investment horizon of 90 days Weatherford International PLC is expected to under-perform the Schlumberger. In addition to that, Weatherford International is 2.02 times more volatile than Schlumberger NV. It trades about -0.1 of its total potential returns per unit of risk. Schlumberger NV is currently generating about -0.11 per unit of volatility. If you would invest  4,225  in Schlumberger NV on November 28, 2024 and sell it today you would lose (165.00) from holding Schlumberger NV or give up 3.91% of portfolio value over 90 days.

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

Weatherford International PLC  vs.  Schlumberger NV

Weatherford International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Weatherford International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Schlumberger NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schlumberger NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Schlumberger is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Weatherford International and Schlumberger

The main advantage of trading using opposite Weatherford International and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weatherford International 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 Weatherford International PLC and Schlumberger NV 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.