Correlation Between TechnipFMC PLC and State Street

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

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

Diversification Opportunities for TechnipFMC PLC and State Street

0.89

Correlation Coefficient

TechnipFMC PLC  State Street

Very poor diversification

The 3 months correlation between TechnipFMC and State is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Corp 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Corp has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and State Street go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and State Street

Assuming the 90 days trading horizon TechnipFMC PLC is expected to generate 1.73 times more return on investment than State Street. However, TechnipFMC PLC is 1.73 times more volatile than State Street Corp. It trades about 0.23 of its potential returns per unit of risk. State Street Corp is currently generating about 0.24 per unit of risk. If you would invest  2,177  in TechnipFMC PLC on September 13, 2024 and sell it today you would earn a total of  743.00  from holding TechnipFMC PLC or generate 34.13% return on investment over 90 days.

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

TechnipFMC PLC  vs.  State Street Corp

TechnipFMC PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TechnipFMC PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

State Street Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, State Street unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TechnipFMC PLC and State Street

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

The idea behind TechnipFMC PLC and State Street Corp 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.