Correlation Between Schlumberger and Nasdaq

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

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

Diversification Opportunities for Schlumberger and Nasdaq

0.93

Correlation Coefficient

Schlumberger  Nasdaq

Almost no diversification

The 3 months correlation between Schlumberger and Nasdaq is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger NV and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 NV are associated (or correlated) with Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Schlumberger i.e., Schlumberger and Nasdaq go up and down completely randomly.

Pair Corralation between Schlumberger and Nasdaq

Considering the 90-day investment horizon Schlumberger NV is expected to under-perform the Nasdaq. But the stock apears to be less risky and, when comparing its historical volatility, Schlumberger NV is 1.28 times less risky than Nasdaq. The stock trades about -0.13 of its potential returns per unit of risk. The Nasdaq Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,029  in Nasdaq Inc on January 16, 2024 and sell it today you would earn a total of  68.00  from holding Nasdaq Inc or generate 1.13% return on investment over 90 days.

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

Schlumberger NV  vs.  Nasdaq Inc

Schlumberger NV

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schlumberger NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Schlumberger may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Nasdaq Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Schlumberger and Nasdaq

The main advantage of trading using opposite Schlumberger and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schlumberger position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.

The idea behind Schlumberger NV and Nasdaq Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.