Correlation Between First and TechnipFMC PLC
Can any of the company-specific risk be diversified away by investing in both First 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 First and TechnipFMC PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Class Metals and TechnipFMC PLC, you can compare the effects of market volatilities on First 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 First with a short position of TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and TechnipFMC PLC.
Diversification Opportunities for First and TechnipFMC PLC
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and TechnipFMC is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and First 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 First Class Metals 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 First i.e., First and TechnipFMC PLC go up and down completely randomly.
Pair Corralation between First and TechnipFMC PLC
Assuming the 90 days trading horizon First Class Metals is expected to under-perform the TechnipFMC PLC. In addition to that, First is 3.13 times more volatile than TechnipFMC PLC. It trades about -0.16 of its total potential returns per unit of risk. TechnipFMC PLC is currently generating about -0.19 per unit of volatility. If you would invest 3,075 in TechnipFMC PLC on November 6, 2024 and sell it today you would lose (128.00) from holding TechnipFMC PLC or give up 4.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Class Metals vs. TechnipFMC PLC
Performance |
| Timeline |
| First Class Metals |
| TechnipFMC PLC |
First and TechnipFMC PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First and TechnipFMC PLC
The main advantage of trading using opposite First and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First 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 First Class Metals 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.| TechnipFMC PLC vs. Batm Advanced Communications | TechnipFMC PLC vs. Morgan Advanced Materials | TechnipFMC PLC vs. Mobius Investment Trust | TechnipFMC PLC vs. Edinburgh Investment Trust |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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