Schlumberger by Correlation: How SLM Relates to Crude
In this part, we’ll analyze the correlation between Schlumberger’s (SLB) stock prices and WTI (West Texas Intermediate) the price of crude oil. The correlation coefficient between a stock price and the price of crude measures the statistical relationship between the two variables. A correlation coefficient value of 0 to 1 shows a positive correlation, whereas 0 states no correlation, and -1 to 0 shows an inverse correlation.
The correlation coefficient between Schlumberger’s stock price and crude oil prices from March 2016 to March 2017 is 0.62. This indicates a relatively strong positive relationship between crude oil prices and Schlumberger’s stock.
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Correlation between OFS stocks and crude oil
As the graph above shows, the VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil since March 2016 is 0.71. OIH is an ETF tracking index of 25 OFS companies. McDermott International’s (MDR) correlation coefficient, by comparison, with crude oil since March 2016 is 0.51, while Fairmount Santrol’s (FMSA) correlation coefficient since March 2016 is 0.49. Baker Hughes’s (BHI) correlation coefficient since March 2016 is 0.52.
Now let’s discuss Wall Street analysts’ recommendations for SLB.