In this part, we’ll analyze the correlation between National Oilwell Varco’s (NOV) stock price and West Texas Intermediate (or WTI) crude oil’s price. The correlation coefficient between NOV’s and crude oil’s price measures the statistical relationship between the two variables. A correlation coefficient value of 0 to 1 shows a positive correlation, 0 states no correlation, and -1 to 0 shows an inverse correlation.
How correlated are National Oilwell Varco and crude oil prices?
The correlation coefficient between National Oilwell Varco’s stock price and crude oil prices from August 2015 to August 16, 2016, is 0.49. This indicates a relatively strong positive relationship between crude oil prices and National Oilwell Varco’s stock.
Correlation between NOV’s stock and crude oil
As noted in the table above, National Oilwell Varco’s correlation coefficient with crude oil price has increased significantly since the end of 2Q16 until August 16, compared to 2Q15. In comparison, the VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil has also increased since July 1 versus the correlation coefficient a year ago. Helmerich & Payne’s (HP) correlation coefficient since July 1 is lower than NOV’s.
In the final part of this series, we’ll discuss National Oilwell Varco’s returns versus the industry indicators.