Correlation Between Schlumberger and Sanyo Chemical

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

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

Diversification Opportunities for Schlumberger and Sanyo Chemical

0.0

Correlation Coefficient

Schlumberger  Sanyo Chemical

Pay attention - limited upside

The 3 months correlation between Schlumberger and Sanyo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger Limited and Sanyo Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Chemical Industries 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 Limited are associated (or correlated) with Sanyo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Chemical Industries has no effect on the direction of Schlumberger i.e., Schlumberger and Sanyo Chemical go up and down completely randomly.

Pair Corralation between Schlumberger and Sanyo Chemical

Assuming the 90 days horizon Schlumberger Limited is expected to under-perform the Sanyo Chemical. In addition to that, Schlumberger is 1.3 times more volatile than Sanyo Chemical Industries. It trades about -0.59 of its total potential returns per unit of risk. Sanyo Chemical Industries is currently generating about -0.03 per unit of volatility. If you would invest  2,420  in Sanyo Chemical Industries on September 23, 2024 and sell it today you would lose (20.00) from holding Sanyo Chemical Industries or give up 0.83% of portfolio value over 90 days.

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

Schlumberger Limited  vs.  Sanyo Chemical Industries

Schlumberger Limited

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Schlumberger Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Schlumberger is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sanyo Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanyo Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sanyo Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Schlumberger and Sanyo Chemical

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

The idea behind Schlumberger Limited and Sanyo Chemical Industries 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..