uploads///Correlation Top

Top Oilfield Services Companies’ Correlation with Crude Oil

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Sep. 29 2016, Updated 8:04 a.m. ET

Correlation coefficient

In this part, we’ll analyze the correlation between the top OFS (oilfield services and equipment) companies’ stock price and crude oil’s price. We already discussed the top OFS companies by expected earnings growth for 3Q16 in this series.

The correlation coefficient between an OFS company’s stock price 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.

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What’s top oilfield services’ correlation with crude oil prices?

The correlation coefficient between Halliburton’s (HAL) stock price and crude oil prices from September 2015 to the present is 0.64. This indicates a relatively strong positive relationship between crude oil prices and Halliburton’s stock. As noted in the above chart, Halliburton’s correlation with crude oil prices rose since the end of 2Q16 until September 22—compared to the past year. The VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil also rose since July 1—compared to the correlation coefficient since September 2015.

Baker Hughes’s (BHI) correlation coefficient with crude oil’s price from September 2015 to the present is 0.56. Its correlation with crude oil prices rose since the end of 2Q16 until September 22—compared to the past year.

Nabors Industries’ (NBR) correlation coefficient with crude oil’s price from September 2015 to the present is 0.64. Its correlation with crude oil prices rose since the end of 2Q16 until September 22—compared to the past year.

Weatherford International’s (WFT) correlation coefficient with crude oil’s price from September 2015 to the present is 0.52. Its correlation with crude oil price rose since the end of 2Q16 until September 22—compared to the past year.

Helmerich & Payne’s (HP) correlation coefficient with crude oil’s price from September 2015 to the present is 0.66. Its correlation with crude oil prices fell since the end of 2Q16 until September 22—compared to the past year.

So, except for Helmerich & Payne, all of the top OFS companies’ correlations with crude oil’s price rose since 2Q16. The crude oil price has gone down ~5% since June 30.

Next, we’ll discuss the correlation between stock prices of the worst OFScompanies by expected earnings growth and crude oil prices.

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