Correlation Between Novavax and Schlumberger

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

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

Diversification Opportunities for Novavax and Schlumberger

0.21

Correlation Coefficient

Novavax  Schlumberger

Modest diversification

The 3 months correlation between Novavax and Schlumberger is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Novavax and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and Novavax 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 Novavax 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 Novavax i.e., Novavax and Schlumberger go up and down completely randomly.

Pair Corralation between Novavax and Schlumberger

Given the investment horizon of 90 days Novavax is expected to under-perform the Schlumberger. In addition to that, Novavax is 2.95 times more volatile than Schlumberger NV. It trades about -0.05 of its total potential returns per unit of risk. Schlumberger NV is currently generating about -0.05 per unit of volatility. If you would invest  5,525  in Schlumberger NV on January 25, 2024 and sell it today you would lose (614.00) from holding Schlumberger NV or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Novavax  vs.  Schlumberger NV

Novavax

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novavax are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Novavax showed solid returns over the last few months and may actually be approaching a breakup point.

Schlumberger NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schlumberger NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Schlumberger is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Novavax and Schlumberger

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

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.