Correlation Between TechnipFMC PLC and Halliburton

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

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

Diversification Opportunities for TechnipFMC PLC and Halliburton

0.69

Correlation Coefficient

TechnipFMC PLC  Halliburton

Poor diversification

The 3 months correlation between TechnipFMC and Halliburton is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and Halliburton go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and Halliburton

Assuming the 90 days horizon TechnipFMC PLC is expected to generate 1.06 times more return on investment than Halliburton. However, TechnipFMC PLC is 1.06 times more volatile than Halliburton. It trades about 0.1 of its potential returns per unit of risk. Halliburton is currently generating about 0.01 per unit of risk. If you would invest  1,171  in TechnipFMC PLC on September 25, 2024 and sell it today you would earn a total of  1,600  from holding TechnipFMC PLC or generate 136.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.51%
Values	Daily Returns

TechnipFMC PLC  vs.  Halliburton

TechnipFMC PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TechnipFMC PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Halliburton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Halliburton is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TechnipFMC PLC and Halliburton

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

The idea behind TechnipFMC PLC and Halliburton 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.