Correlation Between Schlumberger and Western Union

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

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

Diversification Opportunities for Schlumberger and Western Union

-0.18

Correlation Coefficient

Schlumberger  Western Union

Good diversification

The 3 months correlation between Schlumberger and Western is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger Limited and The Western Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union 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 Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of Schlumberger i.e., Schlumberger and Western Union go up and down completely randomly.

Pair Corralation between Schlumberger and Western Union

Assuming the 90 days trading horizon Schlumberger is expected to generate 16.56 times less return on investment than Western Union. But when comparing it to its historical volatility, Schlumberger Limited is 2.56 times less risky than Western Union. It trades about 0.01 of its potential returns per unit of risk. The Western Union is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,521  in The Western Union on September 22, 2024 and sell it today you would earn a total of  1,104  from holding The Western Union or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.16%
Values	Daily Returns

Schlumberger Limited  vs.  The Western Union

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.

Western Union

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Western Union are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Western Union is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Schlumberger and Western Union

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

The idea behind Schlumberger Limited and The Western Union 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.