Correlation Between TechnipFMC PLC and Tenaris SA

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

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

Diversification Opportunities for TechnipFMC PLC and Tenaris SA

0.94

Correlation Coefficient

TechnipFMC PLC  Tenaris SA

Almost no diversification

The 3 months correlation between TechnipFMC and Tenaris is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and Tenaris SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA 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 Tenaris SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaris SA has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and Tenaris SA go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and Tenaris SA

Assuming the 90 days horizon TechnipFMC PLC is expected to generate 2.18 times less return on investment than Tenaris SA. In addition to that, TechnipFMC PLC is 1.23 times more volatile than Tenaris SA. It trades about 0.1 of its total potential returns per unit of risk. Tenaris SA is currently generating about 0.27 per unit of volatility. If you would invest  2,600  in Tenaris SA on September 20, 2024 and sell it today you would earn a total of  940.00  from holding Tenaris SA or generate 36.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

TechnipFMC PLC  vs.  Tenaris SA

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 nearly fragile basic indicators, TechnipFMC PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Tenaris SA

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tenaris SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TechnipFMC PLC and Tenaris SA

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

The idea behind TechnipFMC PLC and Tenaris SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.