In this part of the series, we’ll analyze the correlation between the top OFS (oilfield services and equipment) companies and crude oil prices. In the previous parts of this series, we looked at the top OFS companies by expected earnings growth for 1Q17.
The correlation coefficient between an OFS company’s stock price and the price of crude oil measures the statistical relationship between the two variables. A correlation coefficient value of 0 to 1 shows a positive correlation, with 0 meaning no correlation and -1 to 0 showing an inverse correlation.
The correlation coefficient of the top OFS companies and crude oil prices
The correlation coefficient between the price of Halliburton (HAL) stock and the price of crude oil from March 2016 to the present is 0.67. That indicates a steady positive relationship. The correlation of the VanEck Vectors Oil Services ETF (OIH) with crude oil has been 0.72 since March 2016.
Baker Hughes’s (BHI) correlation coefficient with crude oil from March 2016 to the present is 0.53. For the same period, Flotek Industries’ (FTK) correlation coefficient is 0.44, and Fairmount Santrol’s (FMSA) is 0.51.
Next, let’s look at the correlation of the stock prices of the worst OFS companies by expected earnings growth and the price of crude oil.