Understanding Mid-Cap OFS Companies’ Correlations with Crude Oil


Jul. 12 2016, Updated 12:04 p.m. ET

Correlation coefficient

In this part of our series, we’ll analyze the correlation of the stock prices of Weatherford International (WFT), Core Laboratories (CLB), Dril-Quip (DRQ), and RPC, Inc. (RES) with the WTI (West Texas Intermediate) crude oil price.

The correlation coefficient between these stocks and crude oil prices measures the statistical relationship between the two variables. A correlation coefficient value of 0 to 1 shows a positive correlation, whereas a value of 0 states no correlation, and a value of -1 to 0 shows an inverse correlation.

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Correlation with crude oil

The correlation coefficient between Weatherford International’s stock price and crude oil prices from June 2015 to the present is the lowest among the four companies in our group. Since April 1, the correlation coefficient has decreased compared to the one-year correlation coefficient.

DRQ’s, CLB’s, and RES’s stock and crude

The correlation coefficient between Dril-Quip’s stock price and crude oil prices since April 1 has decreased compared to its correlation coefficient since June 2015. Notably, DRQ makes up 0.3% of the iShares S&P Mid-Cap 400 Value ETF (IJJ).

On the other hand, the correlation coefficient between Core Laboratories’ stock price and the price of crude since April 1 has increased compared to its correlation coefficient since June 2015. RPC, Inc.’s correlation with crude since April 1 has also increased compared to its correlation coefficient since June 2015.

In the next part, we’ll look at the short interest for these OFS mid-cap stocks.


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