Correlation Between Schlumberger and Sempra Energy

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

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

Diversification Opportunities for Schlumberger and Sempra Energy

0.15

Correlation Coefficient

Schlumberger  Sempra Energy

Average diversification

The 3 months correlation between Schlumberger and Sempra is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger NV and Sempra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra Energy 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 Sempra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempra Energy has no effect on the direction of Schlumberger i.e., Schlumberger and Sempra Energy go up and down completely randomly.

Pair Corralation between Schlumberger and Sempra Energy

Considering the 90-day investment horizon Schlumberger NV is expected to under-perform the Sempra Energy. But the stock apears to be less risky and, when comparing its historical volatility, Schlumberger NV is 1.21 times less risky than Sempra Energy. The stock trades about -0.38 of its potential returns per unit of risk. The Sempra Energy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,924  in Sempra Energy on January 26, 2024 and sell it today you would earn a total of  280.00  from holding Sempra Energy or generate 4.04% return on investment over 90 days.

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

Schlumberger NV  vs.  Sempra Energy

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 latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sempra Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sempra Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Schlumberger and Sempra Energy

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

The idea behind Schlumberger NV and Sempra Energy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.