Correlation Between Schlumberger and Novavax

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

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

Diversification Opportunities for Schlumberger and Novavax

0.22

Correlation Coefficient

Schlumberger  Novavax

Modest diversification

The 3 months correlation between Schlumberger and Novavax is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger NV and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax 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 Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Schlumberger i.e., Schlumberger and Novavax go up and down completely randomly.

Pair Corralation between Schlumberger and Novavax

Considering the 90-day investment horizon Schlumberger NV is expected to generate 0.38 times more return on investment than Novavax. However, Schlumberger NV is 2.64 times less risky than Novavax. It trades about 0.05 of its potential returns per unit of risk. Novavax is currently generating about -0.06 per unit of risk. If you would invest  3,577  in Schlumberger NV on January 19, 2024 and sell it today you would earn a total of  1,572  from holding Schlumberger NV or generate 43.95% return on investment over 90 days.

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

Schlumberger NV  vs.  Novavax

Schlumberger NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schlumberger NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Novavax

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novavax are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Novavax may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Schlumberger and Novavax

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

The idea behind Schlumberger NV and Novavax 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.