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What Did the Market Suggest about Weatherford on September 22?

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Part 3
What Did the Market Suggest about Weatherford on September 22? PART 3 OF 3

How’s Weatherford Reacting to Crude Oil Price Changes?

Correlation between Weatherford and crude oil

The correlation coefficient between Weatherford International’s (WFT) stock price and WTI (West Texas Intermediate) crude oil prices on September 15–22, 2017, is 0.29. It shows that Weatherford International and crude oil prices had a mild but positive correlation in the past week.

How&#8217;s Weatherford Reacting to Crude Oil Price Changes?

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What does Weatherford’s correlation with crude oil mean?

Weatherford International’s moderate correlation with crude oil might not help its stock price much if crude oil’s current upward bias continues. Its correlation with the crude oil price is lower in the trailing year to the week ending September 22, 2017—compared to the same week last year.

In comparison, the VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil is lower in the trailing year to the week ending September 22, 2017—compared to the same week in 2016. It’s likely that the sector as a whole has decoupled a little from crude oil prices lately.

Correlation between Weatherford’s peers and crude oil

OIH’s correlation with crude oil since September 15, 2017, is 0.53—as we noted in the above graph. Precision Drilling’s (PDS) correlation coefficient since September 15, 2017, is 0.94, while Core Laboratories’ (CLB) correlation coefficient since September 15, 2017, is -0.27. During the same period, Paterson-UTI Energy’s (PTEN) correlation coefficient is 0.87.

A high correlation means that the stock was impacted more by the movements in crude oil. A negative correlation means that the stock frequently moved in the opposite direction from crude oil.

To learn more about the OFS industry, read The Oilfield Equipment and Services Industry: A Primer.

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