Correlation Between Ford and Schlumberger
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Schlumberger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Schlumberger NV, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Schlumberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Schlumberger.
Diversification Opportunities for Ford and Schlumberger
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Schlumberger is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and Ford 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 Ford Motor 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 Ford i.e., Ford and Schlumberger go up and down completely randomly.
Pair Corralation between Ford and Schlumberger
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.37 times more return on investment than Schlumberger. However, Ford is 1.37 times more volatile than Schlumberger NV. It trades about 0.04 of its potential returns per unit of risk. Schlumberger NV is currently generating about -0.03 per unit of risk. If you would invest 969.00 in Ford Motor on August 24, 2024 and sell it today you would earn a total of 156.00 from holding Ford Motor or generate 16.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Schlumberger NV
Performance |
| Timeline |
| Ford Motor |
| Schlumberger NV |
Ford and Schlumberger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Schlumberger
The main advantage of trading using opposite Ford and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |