Correlation Between Cable One and Schlumberger

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

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

Diversification Opportunities for Cable One and Schlumberger

0.65

Correlation Coefficient

Cable One  Schlumberger

Poor diversification

The 3 months correlation between Cable and Schlumberger is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cable One and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited and Cable One 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 Cable One 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 Limited has no effect on the direction of Cable One i.e., Cable One and Schlumberger go up and down completely randomly.

Pair Corralation between Cable One and Schlumberger

Assuming the 90 days trading horizon Cable One is expected to under-perform the Schlumberger. But the stock apears to be less risky and, when comparing its historical volatility, Cable One is 1.2 times less risky than Schlumberger. The stock trades about -0.03 of its potential returns per unit of risk. The Schlumberger Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  13,313  in Schlumberger Limited on September 22, 2024 and sell it today you would lose (1,985) from holding Schlumberger Limited or give up 14.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	70.89%
Values	Daily Returns

Cable One  vs.  Schlumberger Limited

Cable One

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

Schlumberger Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schlumberger Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Schlumberger is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cable One and Schlumberger

The main advantage of trading using opposite Cable One and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cable One 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 Cable One and Schlumberger Limited 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.