Correlation Between Dow Jones and Schlumberger
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Schlumberger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Schlumberger NV, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Schlumberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Schlumberger.
Diversification Opportunities for Dow Jones and Schlumberger
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Schlumberger is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Schlumberger go up and down completely randomly.
Pair Corralation between Dow Jones and Schlumberger
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.09 times less return on investment than Schlumberger. But when comparing it to its historical volatility, Dow Jones Industrial is 2.09 times less risky than Schlumberger. It trades about 0.26 of its potential returns per unit of risk. Schlumberger NV is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,139 in Schlumberger NV on August 28, 2024 and sell it today you would earn a total of 236.00 from holding Schlumberger NV or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Schlumberger NV
Performance |
| Timeline |
Dow Jones and Schlumberger Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Schlumberger NV
Pair trading matchups for Schlumberger
Pair Trading with Dow Jones and Schlumberger
The main advantage of trading using opposite Dow Jones and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
| Schlumberger vs. Baker Hughes Co | Schlumberger vs. NOV Inc | Schlumberger vs. Weatherford International PLC | Schlumberger vs. Tenaris SA ADR |
Check out your portfolio center.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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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