Correlation Between SPDR Series and Schlumberger

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

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

Diversification Opportunities for SPDR Series and Schlumberger

0.56

Correlation Coefficient

SPDR Series  Schlumberger

Very weak diversification

The 3 months correlation between SPDR and Schlumberger is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited and SPDR Series 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 SPDR Series Trust 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 SPDR Series i.e., SPDR Series and Schlumberger go up and down completely randomly.

Pair Corralation between SPDR Series and Schlumberger

Assuming the 90 days trading horizon SPDR Series Trust is expected to generate 0.75 times more return on investment than Schlumberger. However, SPDR Series Trust is 1.33 times less risky than Schlumberger. It trades about 0.02 of its potential returns per unit of risk. Schlumberger Limited is currently generating about -0.02 per unit of risk. If you would invest  248,283  in SPDR Series Trust on October 5, 2024 and sell it today you would earn a total of  16,017  from holding SPDR Series Trust or generate 6.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

SPDR Series Trust  vs.  Schlumberger Limited

SPDR Series Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 SPDR Series and Schlumberger

The main advantage of trading using opposite SPDR Series and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Series 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 SPDR Series Trust 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.