Correlation Between Endo International and TechnipFMC PLC

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

By analyzing existing cross correlation between Endo International PLC and TechnipFMC PLC, you can compare the effects of market volatilities on Endo International 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 Endo International with a short position of TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endo International and TechnipFMC PLC.

Diversification Opportunities for Endo International and TechnipFMC PLC

0.06

Correlation Coefficient

Endo International  TechnipFMC PLC

Significant diversification

The 3 months correlation between Endo and TechnipFMC is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Endo International PLC and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and Endo International 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 Endo International PLC 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 Endo International i.e., Endo International and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between Endo International and TechnipFMC PLC

Assuming the 90 days trading horizon Endo International is expected to generate 1.08 times less return on investment than TechnipFMC PLC. But when comparing it to its historical volatility, Endo International PLC is 1.98 times less risky than TechnipFMC PLC. It trades about 0.13 of its potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,694  in TechnipFMC PLC on November 19, 2024 and sell it today you would earn a total of  197.00  from holding TechnipFMC PLC or generate 7.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Endo International PLC  vs.  TechnipFMC PLC

Endo International PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Endo International PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Endo International may actually be approaching a critical reversion point that can send shares even higher in March 2025.

TechnipFMC PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TechnipFMC PLC may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Endo International and TechnipFMC PLC

The main advantage of trading using opposite Endo International and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endo International 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 Endo International PLC 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.