In this article, we’ll analyze the correlation between Schlumberger’s (SLB) stock price and West Texas Intermediate (or WTI) crude oil’s price.
The correlation coefficient between SLB’s and crude oil’s prices measures the statistical relationship between the two variables. A correlation coefficient of 0 to 1 shows a positive correlation, 0 shows no correlation, and -1 to 0 shows an inverse correlation.
Schlumberger’s correlation with crude oil’s price
The correlation coefficient between Schlumberger’s stock price and crude oil’s price from April 5, 2016, to April 5, 2017, was 0.63. This indicated a relatively strong positive relationship between crude oil and Schlumberger stock.
As we can see in the graph above, the VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil since April 2016 is 0.72. OIH is an ETF tracking an index of 25 oilfield equipment and services companies.
CARBO Ceramics’ (CRR) correlation coefficient since April 2016 is 0.45, while Core Laboratories’ (CLB) correlation coefficient since April 2016 is 0.57. Precision Drilling’s (PDS) correlation coefficient for the same period is ~0.65.
We’ll discuss Schlumberger’s implied volatility in the next article.