Correlation Between Schlumberger and Petro Rio
Can any of the company-specific risk be diversified away by investing in both Schlumberger and Petro Rio 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 Schlumberger and Petro Rio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schlumberger Limited and Petro Rio SA, you can compare the effects of market volatilities on Schlumberger and Petro Rio 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 Schlumberger with a short position of Petro Rio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schlumberger and Petro Rio.
Diversification Opportunities for Schlumberger and Petro Rio
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Schlumberger and Petro is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger Limited and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA and Schlumberger 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 Schlumberger Limited are associated (or correlated) with Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of Schlumberger i.e., Schlumberger and Petro Rio go up and down completely randomly.
Pair Corralation between Schlumberger and Petro Rio
Assuming the 90 days trading horizon Schlumberger Limited is expected to generate 1.4 times more return on investment than Petro Rio. However, Schlumberger is 1.4 times more volatile than Petro Rio SA. It trades about 0.22 of its potential returns per unit of risk. Petro Rio SA is currently generating about -0.05 per unit of risk. If you would invest 11,854 in Schlumberger Limited on September 1, 2024 and sell it today you would earn a total of 1,263 from holding Schlumberger Limited or generate 10.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Schlumberger Limited vs. Petro Rio SA
Performance |
| Timeline |
| Schlumberger Limited |
| Petro Rio SA |
Schlumberger and Petro Rio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schlumberger and Petro Rio
The main advantage of trading using opposite Schlumberger and Petro Rio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schlumberger position performs unexpectedly, Petro Rio 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 Petro Rio will offset losses from the drop in Petro Rio's long position.| Schlumberger vs. Unity Software | Schlumberger vs. Cognizant Technology Solutions | Schlumberger vs. Spotify Technology SA | Schlumberger vs. salesforce inc |
| Petro Rio vs. Sumitomo Mitsui Financial | Petro Rio vs. Banco Santander Chile | Petro Rio vs. Toyota Motor | Petro Rio vs. Mitsubishi UFJ Financial |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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