Correlation Between TechnipFMC PLC and Adaro Energy
Can any of the company-specific risk be diversified away by investing in both TechnipFMC PLC and Adaro Energy 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 Adaro Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TechnipFMC PLC and Adaro Energy Tbk, you can compare the effects of market volatilities on TechnipFMC PLC and Adaro Energy 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 Adaro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of TechnipFMC PLC and Adaro Energy.
Diversification Opportunities for TechnipFMC PLC and Adaro Energy
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TechnipFMC and Adaro is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and Adaro Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaro Energy Tbk 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 Adaro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaro Energy Tbk has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and Adaro Energy go up and down completely randomly.
Pair Corralation between TechnipFMC PLC and Adaro Energy
Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 1.42 times less return on investment than Adaro Energy. But when comparing it to its historical volatility, TechnipFMC PLC is 3.48 times less risky than Adaro Energy. It trades about 0.1 of its potential returns per unit of risk. Adaro Energy Tbk is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 826.00 in Adaro Energy Tbk on September 3, 2024 and sell it today you would earn a total of 74.00 from holding Adaro Energy Tbk or generate 8.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.14% |
| Values | Daily Returns |
TechnipFMC PLC vs. Adaro Energy Tbk
Performance |
| Timeline |
| TechnipFMC PLC |
| Adaro Energy Tbk |
TechnipFMC PLC and Adaro Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TechnipFMC PLC and Adaro Energy
The main advantage of trading using opposite TechnipFMC PLC and Adaro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TechnipFMC PLC position performs unexpectedly, Adaro Energy 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 Adaro Energy will offset losses from the drop in Adaro Energy's long position.| TechnipFMC PLC vs. Oceaneering International | TechnipFMC PLC vs. NOV Inc | TechnipFMC PLC vs. Flowserve | TechnipFMC PLC vs. Core Laboratories NV |
| Adaro Energy vs. Thungela Resources Limited | Adaro Energy vs. Geo Energy Resources | Adaro Energy vs. Bukit Asam Tbk | Adaro Energy vs. China Shenhua Energy |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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