How Is Weatherford Reacting to Crude Oil’s Price Changes?
Correlation between Weatherford and crude oil
The correlation coefficient between Weatherford International’s (WFT) stock price and West Texas Intermediate (or WTI) crude oil prices from September 22 to September 29, 2017, was 0.63. This shows that Weatherford International and crude oil prices had a strong positive correlation in the past week.
WFT’s correlation with the Dow Jones Industrial Average (DJIA-INDEX) from September 22 to September 29, 2017, was negative.
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What does Weatherford’s correlation with crude oil mean?
Weatherford International’s (WFT) correlation with crude oil may help its stock price if crude oil’s current upward momentum continues. WFT’s correlation with crude oil prices was lower in the trailing year to the week ended September 29, 2017, compared to the previous year to the week ended September 29, 2016.
In comparison, the VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil was lower in the trailing year to the week ended September 29, 2017, versus the previous year to the week ended September 29, 2016. Recently, it seems that the sector as a whole has somewhat decoupled from crude oil prices.
Correlation between WFT’s peers and crude oil
Precision Drilling Corporation’s (PDS) correlation coefficient with crude oil since September 22, 2017, was 0.46. Core Laboratories’ (CLB) correlation coefficient with crude oil since that date was 0.34. Patterson-UTI Energy’s (PTEN) correlation coefficient with crude oil during the same period was 0.63.
A high correlation means the stock was impacted more by the movements in crude oil. A negative correlation, on the other hand, means that the stock frequently moved in the opposite direction of crude oil.
You can learn more about the OFS industry in Market Realist’s The Oilfield Equipment and Services Industry: A Primer. You can also read about Wall Street’s expectations of OFS companies such as Patterson-UTI Energy and Nabors Industries (NBR) in The Top and Bottom of Oilfield Service Stocks in 3Q17.