Correlation Between Saipem SpA and Schlumberger

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

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

Diversification Opportunities for Saipem SpA and Schlumberger

0.79

Correlation Coefficient

Saipem SpA  Schlumberger

Poor diversification

The 3 months correlation between Saipem and Schlumberger is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and Saipem SpA 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 Saipem SpA 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 Saipem SpA i.e., Saipem SpA and Schlumberger go up and down completely randomly.

Pair Corralation between Saipem SpA and Schlumberger

Assuming the 90 days horizon Saipem SpA is expected to generate 2.47 times more return on investment than Schlumberger. However, Saipem SpA is 2.47 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 -0.39 per unit of risk. If you would invest  235.00  in Saipem SpA on January 25, 2024 and sell it today you would earn a total of  3.00  from holding Saipem SpA or generate 1.28% return on investment over 90 days.

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

Saipem SpA  vs.  Schlumberger NV

Saipem SpA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saipem SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Saipem SpA reported 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 Saipem SpA and Schlumberger

The main advantage of trading using opposite Saipem SpA and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saipem SpA 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 Saipem SpA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.