In this part, we’ll analyze the correlation between Baker Hughes’s (BHI) stock price and West Texas Intermediate (or WTI) crude oil’s price. The correlation coefficient between these prices 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.
BHI’s correlation with crude oil price
The correlation coefficient between Baker Hughes’s stock price and crude oil prices from April 2016 to the present is 0.51. This indicates a relatively strong positive relationship between crude oil prices and Baker Hughes stock.
Correlation between BHI’s peers and crude oil
As noted in the chart above, National Oilwell Varco’s (NOV) correlation coefficient with crude oil since April 2016 is 0.57. Precision Drilling’s (PDS) correlation coefficient since April 2016 is 0.65. Fairmount Santrol Holdings’s (FMSA) correlation coefficient during the same period is 0.51.
Since April 2016, the correlation coefficient between the S&P 500 Index (SPX-INDEX) and Baker Hughes is 0.37. BHI is a constituent of the VanEck Vectors Oil Services ETF (OIH), which is an ETF tracking index of 25 OFS companies.
In the final part of this series, we’ll discuss Wall Street analysts’ recommendations for BHI.