Correlation Between Iron Road and TechnipFMC PLC

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

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

Diversification Opportunities for Iron Road and TechnipFMC PLC

-0.38

Correlation Coefficient

Iron Road  TechnipFMC PLC

Very good diversification

The 3 months correlation between Iron and TechnipFMC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road Limited and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and Iron Road 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 Iron Road Limited 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 Iron Road i.e., Iron Road and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between Iron Road and TechnipFMC PLC

Assuming the 90 days horizon Iron Road Limited is expected to under-perform the TechnipFMC PLC. In addition to that, Iron Road is 2.28 times more volatile than TechnipFMC PLC. It trades about -0.22 of its total potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.08 per unit of volatility. If you would invest  2,696  in TechnipFMC PLC on September 20, 2024 and sell it today you would earn a total of  78.00  from holding TechnipFMC PLC or generate 2.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Iron Road Limited  vs.  TechnipFMC PLC

Iron Road Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Road Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Iron Road is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Iron Road and TechnipFMC PLC

The main advantage of trading using opposite Iron Road and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Road 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 Iron Road Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.