Correlation Between TechnipFMC PLC and Absolute Capital

Can any of the company-specific risk be diversified away by investing in both TechnipFMC PLC and Absolute Capital 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 Absolute Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TechnipFMC PLC and Absolute Capital Defender, you can compare the effects of market volatilities on TechnipFMC PLC and Absolute Capital 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 Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of TechnipFMC PLC and Absolute Capital.

Diversification Opportunities for TechnipFMC PLC and Absolute Capital

0.23

Correlation Coefficient

TechnipFMC PLC  Absolute Capital

Modest diversification

The 3 months correlation between TechnipFMC and Absolute is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and Absolute Capital Defender in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender 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 Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and Absolute Capital go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and Absolute Capital

Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 5.05 times more return on investment than Absolute Capital. However, TechnipFMC PLC is 5.05 times more volatile than Absolute Capital Defender. It trades about 0.11 of its potential returns per unit of risk. Absolute Capital Defender is currently generating about 0.01 per unit of risk. If you would invest  2,163  in TechnipFMC PLC on March 7, 2024 and sell it today you would earn a total of  263.00  from holding TechnipFMC PLC or generate 12.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

TechnipFMC PLC  vs.  Absolute Capital Defender

TechnipFMC PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, TechnipFMC PLC may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Absolute Capital Defender

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Capital Defender are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Absolute Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TechnipFMC PLC and Absolute Capital

The main advantage of trading using opposite TechnipFMC PLC and Absolute Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TechnipFMC PLC position performs unexpectedly, Absolute Capital 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 Absolute Capital will offset losses from the drop in Absolute Capital's long position.

The idea behind TechnipFMC PLC and Absolute Capital Defender 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.