Correlation Between Cactus and Schlumberger

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

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

Diversification Opportunities for Cactus and Schlumberger

0.62

Correlation Coefficient

Cactus  Schlumberger

Poor diversification

The 3 months correlation between Cactus and Schlumberger is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and Cactus 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 Cactus 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 NV has no effect on the direction of Cactus i.e., Cactus and Schlumberger go up and down completely randomly.

Pair Corralation between Cactus and Schlumberger

Considering the 90-day investment horizon Cactus Inc is expected to generate 1.34 times more return on investment than Schlumberger. However, Cactus is 1.34 times more volatile than Schlumberger NV. It trades about 0.01 of its potential returns per unit of risk. Schlumberger NV is currently generating about -0.04 per unit of risk. If you would invest  5,442  in Cactus Inc on December 2, 2024 and sell it today you would lose (188.00) from holding Cactus Inc or give up 3.45% of portfolio value over 90 days.

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

Cactus Inc  vs.  Schlumberger NV

Cactus Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cactus Inc 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 technical indicators remain rather sound which may send shares a bit higher in April 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 Cactus and Schlumberger

The main advantage of trading using opposite Cactus and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cactus 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 Cactus Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.