Correlation Between NXT Energy and Schlumberger
Can any of the company-specific risk be diversified away by investing in both NXT Energy 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 NXT Energy and Schlumberger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NXT Energy Solutions and Schlumberger NV, you can compare the effects of market volatilities on NXT Energy 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 NXT Energy with a short position of Schlumberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXT Energy and Schlumberger.
Diversification Opportunities for NXT Energy and Schlumberger
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between NXT and Schlumberger is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NXT Energy Solutions and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and NXT Energy 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 NXT Energy Solutions 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 NXT Energy i.e., NXT Energy and Schlumberger go up and down completely randomly.
Pair Corralation between NXT Energy and Schlumberger
Assuming the 90 days horizon NXT Energy Solutions is expected to generate 4.18 times more return on investment than Schlumberger. However, NXT Energy is 4.18 times more volatile than Schlumberger NV. It trades about 0.03 of its potential returns per unit of risk. Schlumberger NV is currently generating about 0.02 per unit of risk. If you would invest 24.00 in NXT Energy Solutions on June 23, 2024 and sell it today you would lose (6.00) from holding NXT Energy Solutions or give up 25.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
NXT Energy Solutions vs. Schlumberger NV
Performance |
Timeline |
NXT Energy Solutions |
Schlumberger NV |
NXT Energy and Schlumberger Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NXT Energy and Schlumberger
The main advantage of trading using opposite NXT Energy and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NXT Energy 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.NXT Energy vs. Dawson Geophysical | NXT Energy vs. Bri Chem Corp | NXT Energy vs. NCS Multistage Holdings | NXT Energy vs. Bristow Group |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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