Correlation Between TechnipFMC PLC and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both TechnipFMC PLC and Solstad Offshore 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 Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TechnipFMC PLC and Solstad Offshore ASA, you can compare the effects of market volatilities on TechnipFMC PLC and Solstad Offshore 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 Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of TechnipFMC PLC and Solstad Offshore.
Diversification Opportunities for TechnipFMC PLC and Solstad Offshore
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TechnipFMC and Solstad is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and Solstad Offshore go up and down completely randomly.
Pair Corralation between TechnipFMC PLC and Solstad Offshore
Assuming the 90 days trading horizon TechnipFMC PLC is expected to generate 1.14 times more return on investment than Solstad Offshore. However, TechnipFMC PLC is 1.14 times more volatile than Solstad Offshore ASA. It trades about 0.08 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.03 per unit of risk. If you would invest 655.00 in TechnipFMC PLC on September 26, 2024 and sell it today you would earn a total of 2,248 from holding TechnipFMC PLC or generate 343.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 99.2% |
Values | Daily Returns |
TechnipFMC PLC vs. Solstad Offshore ASA
Performance |
Timeline |
TechnipFMC PLC |
Solstad Offshore ASA |
TechnipFMC PLC and Solstad Offshore Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with TechnipFMC PLC and Solstad Offshore
The main advantage of trading using opposite TechnipFMC PLC and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TechnipFMC PLC position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.TechnipFMC PLC vs. Zoom Video Communications | TechnipFMC PLC vs. Enbridge | TechnipFMC PLC vs. Endo International PLC | TechnipFMC PLC vs. Balfour Beatty 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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