Correlation Between Associated British and TechnipFMC PLC
Can any of the company-specific risk be diversified away by investing in both Associated British and TechnipFMC PLC 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 Associated British and TechnipFMC PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and TechnipFMC PLC, you can compare the effects of market volatilities on Associated British and TechnipFMC PLC 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 Associated British with a short position of TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and TechnipFMC PLC.
Diversification Opportunities for Associated British and TechnipFMC PLC
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and TechnipFMC is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and Associated British 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 Associated British Foods are associated (or correlated) with TechnipFMC PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC PLC has no effect on the direction of Associated British i.e., Associated British and TechnipFMC PLC go up and down completely randomly.
Pair Corralation between Associated British and TechnipFMC PLC
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the TechnipFMC PLC. But the stock apears to be less risky and, when comparing its historical volatility, Associated British Foods is 1.24 times less risky than TechnipFMC PLC. The stock trades about -0.13 of its potential returns per unit of risk. The TechnipFMC PLC is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 2,402 in TechnipFMC PLC on August 31, 2024 and sell it today you would earn a total of 558.00 from holding TechnipFMC PLC or generate 23.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. TechnipFMC PLC
Performance |
| Timeline |
| Associated British Foods |
| TechnipFMC PLC |
Associated British and TechnipFMC PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and TechnipFMC PLC
The main advantage of trading using opposite Associated British and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, TechnipFMC PLC 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 TechnipFMC PLC will offset losses from the drop in TechnipFMC PLC's long position.| Associated British vs. Aeorema Communications Plc | Associated British vs. British American Tobacco | Associated British vs. Induction Healthcare Group | Associated British vs. Optima Health plc |
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Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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