Correlation between Schlumberger and crude oil
What does SLB’s correlation with crude oil mean?
Since June 30, the West Texas Intermediate crude oil price has risen 12%, following crude oil prices’ considerable fall over the previous four months. However, analysts don’t expect a significant impending downside in crude oil prices. So a modest correlation may not be helpful to support any likely rise in SLB’s stock price. Schlumberger’s correlation with crude oil prices has fallen sharply from September 29, 2016, to September 29, 2017.
Moreover, SLB’s negative correlation with the Dow Jones index would mean that it isn’t really benefiting from the record highs the broader equity markets have been hitting.
Correlation between SLB’s peers and crude oil
The VanEck Vectors Oil Services ETF’s (OIH) correlation with crude oil as of September 22 was 0.58. OIH’s correlation with crude oil has fallen severely in the trailing year to September 29 versus the previous year. Helmerich & Payne’s (HP) correlation coefficient as of September 22 was 0.56. McDermott International’s (MDR) correlation coefficient was 0.68, while Oil States International’s (OIS) correlation coefficient was 0.20.
A high correlation means the stock was impacted more by movements in crude oil. A negative correlation, on the other hand, means the stock was impacted more by movements in crude oil in the opposite direction.
Learn about the OFS industry in Market Realist’s The Oilfield Equipment and Services Industry: A Primer.
Also, read Wall Street’s expectations for OFS companies, including Patterson-UTI Energy (PTEN) and Nabors Industries (NBR), in Market Realist’s The Top and Bottom of Oilfield Service Stocks in 3Q17.