Correlation Between Schlumberger and Occidental Petroleum

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

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

Diversification Opportunities for Schlumberger and Occidental Petroleum

0.81

Correlation Coefficient

Schlumberger  Occidental Petroleum

Very poor diversification

The 3 months correlation between Schlumberger and Occidental is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger NV and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Schlumberger i.e., Schlumberger and Occidental Petroleum go up and down completely randomly.

Pair Corralation between Schlumberger and Occidental Petroleum

Considering the 90-day investment horizon Schlumberger NV is expected to under-perform the Occidental Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Schlumberger NV is 1.04 times less risky than Occidental Petroleum. The stock trades about 0.0 of its potential returns per unit of risk. The Occidental Petroleum is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,859  in Occidental Petroleum on May 5, 2025 and sell it today you would earn a total of  482.00  from holding Occidental Petroleum or generate 12.49% return on investment over 90 days.

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

Schlumberger NV  vs.  Occidental Petroleum

Schlumberger NV

Risk-Adjusted Performance

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

Occidental Petroleum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Occidental Petroleum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Schlumberger and Occidental Petroleum

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

The idea behind Schlumberger NV and Occidental Petroleum 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.