Correlation Between Beijing Gas and TechnipFMC PLC

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Can any of the company-specific risk be diversified away by investing in both Beijing Gas 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 Beijing Gas and TechnipFMC PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beijing Gas Blue and TechnipFMC PLC, you can compare the effects of market volatilities on Beijing Gas 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 Beijing Gas with a short position of TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Gas and TechnipFMC PLC.

Diversification Opportunities for Beijing Gas and TechnipFMC PLC

-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between Beijing and TechnipFMC is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Gas Blue and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and Beijing Gas 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 Beijing Gas Blue 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 Beijing Gas i.e., Beijing Gas and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between Beijing Gas and TechnipFMC PLC

Assuming the 90 days horizon Beijing Gas Blue is expected to generate 28.86 times more return on investment than TechnipFMC PLC. However, Beijing Gas is 28.86 times more volatile than TechnipFMC PLC. It trades about 0.08 of its potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.12 per unit of risk. If you would invest  0.33  in Beijing Gas Blue on September 4, 2024 and sell it today you would earn a total of  0.08  from holding Beijing Gas Blue or generate 24.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Beijing Gas Blue  vs.  TechnipFMC PLC

 Performance 
       Timeline  
Beijing Gas Blue 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Gas Blue are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Beijing Gas reported solid returns over the last few months and may actually be approaching a breakup point.
TechnipFMC PLC 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, TechnipFMC PLC demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Beijing Gas and TechnipFMC PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beijing Gas and TechnipFMC PLC

The main advantage of trading using opposite Beijing Gas and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Gas 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.
The idea behind Beijing Gas Blue and TechnipFMC PLC 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.
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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