uploads/2017/09/Correlation.jpg

The Correlation between Crude Oil and SLB Stock

By

Updated

Correlation between crude oil and SLB’s stock

In this part, 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 crude oil and SLB’s stock price from August 31, 2016, to August 31, 2017, is 0.60. This indicates a close positive relationship between crude oil prices and Schlumberger stock.

Article continues below advertisement

Has SLB’s correlation with crude oil price changed?

As noted in the chart above, SLB’s correlation with crude oil’s price is lower in the trailing year to August 2017 compared to the previous year to August 2016. Crude oil’s price is 9% higher compared to a year ago.

There are many factors weighing down an upside potential to crude oil prices, with Hurricane Harvey being the latest in the fray. As a result, a high correlation does not bode well for SLB’s stock price. OIH’s correlation with crude oil is higher in the trailing year to August 31, 2017, compared to the previous two years.

Correlation between crude oil and SLB’s stock

As noted in the chart above, the VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil since August 2016 is 0.71. Helmerich & Payne’s (HP) correlation coefficient since August 2016 is 0.58, and McDermott International’s (MDR) correlation coefficient since August 2016 is 0.46. Oil States International’s (OIS) correlation coefficient is 0.54 during the same period.

In the final part of this series, we’ll discuss Wall Street’s targets for Schlumberger.

Advertisement

More From Market Realist