Correlation Between Tetra Technologies and Schlumberger

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

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

Diversification Opportunities for Tetra Technologies and Schlumberger

0.73

Correlation Coefficient

Tetra Technologies  Schlumberger

Poor diversification

The 3 months correlation between Tetra and Schlumberger is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Tetra Technologies and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV and Tetra Technologies 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 Tetra Technologies 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 Tetra Technologies i.e., Tetra Technologies and Schlumberger go up and down completely randomly.

Pair Corralation between Tetra Technologies and Schlumberger

Considering the 90-day investment horizon Tetra Technologies is expected to generate 1.81 times more return on investment than Schlumberger. However, Tetra Technologies is 1.81 times more volatile than Schlumberger NV. It trades about 0.02 of its potential returns per unit of risk. Schlumberger NV is currently generating about -0.03 per unit of risk. If you would invest  439.00  in Tetra Technologies on January 24, 2024 and sell it today you would earn a total of  3.00  from holding Tetra Technologies or generate 0.68% return on investment over 90 days.

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

Tetra Technologies  vs.  Schlumberger NV

Tetra Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tetra Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Tetra Technologies is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tetra Technologies and Schlumberger

The main advantage of trading using opposite Tetra Technologies and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetra Technologies 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 Tetra Technologies 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.