Correlation Between TechnipFMC PLC and Microchip Technology

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Can any of the company-specific risk be diversified away by investing in both TechnipFMC PLC and Microchip Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining TechnipFMC PLC and Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TechnipFMC PLC and Microchip Technology, you can compare the effects of market volatilities on TechnipFMC PLC and Microchip Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in TechnipFMC PLC with a short position of Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of TechnipFMC PLC and Microchip Technology.

Diversification Opportunities for TechnipFMC PLC and Microchip Technology

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between TechnipFMC and Microchip is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology and TechnipFMC PLC is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on TechnipFMC PLC are associated (or correlated) with Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and Microchip Technology go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and Microchip Technology

Assuming the 90 days trading horizon TechnipFMC PLC is expected to generate 0.83 times more return on investment than Microchip Technology. However, TechnipFMC PLC is 1.21 times less risky than Microchip Technology. It trades about 0.43 of its potential returns per unit of risk. Microchip Technology is currently generating about -0.23 per unit of risk. If you would invest  2,394  in TechnipFMC PLC on August 25, 2024 and sell it today you would earn a total of  464.00  from holding TechnipFMC PLC or generate 19.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

TechnipFMC PLC  vs.  Microchip Technology

 Performance 
       Timeline  
TechnipFMC PLC 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TechnipFMC PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.
Microchip Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Microchip Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

TechnipFMC PLC and Microchip Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TechnipFMC PLC and Microchip Technology

The main advantage of trading using opposite TechnipFMC PLC and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TechnipFMC PLC position performs unexpectedly, Microchip Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Microchip Technology will offset losses from the drop in Microchip Technology's long position.
The idea behind TechnipFMC PLC and Microchip Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Managers module to screen money managers from public funds and ETFs managed around the world.

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