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Schlumberger in Paradise? Your Key Market Indicators

PART:
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Part 4
Schlumberger in Paradise? Your Key Market Indicators PART 4 OF 5

Schlumberger versus Crude: Understanding Correlation Coefficient

Correlation coefficient

In this part of our series on Schlumberger (SLB), we’ll analyze the correlation between SLB’s stock prices and WTI (West Texas Intermediate) crude oil’s price. The correlation coefficient between a stock price and the price of crude oil measures the statistical relationship between both 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.

Schlumberger versus Crude: Understanding Correlation Coefficient

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Correlations with crude

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.

As the graph above shows, the VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil since March 2016 is 0.70. (OIH is an ETF that tracks an index of 25 oilfield equipment and services companies.) McDermott International’s (MDR) correlation coefficient with crude oil since March 2016 is 0.55, while Patterson-UTI Energy’s (PTEN) correlation coefficient since March 2016 is also 0.63. Baker Hughes’s (BHI) correlation coefficient since March 2016 is 0.56.

You can read more on PTEN in Market Realist’s What’s Wall Street’s Call on Patterson-UTI Energy. Continue to the next and final part for our discussion of Wall Street analysts’ recommendations for SLB.

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