Correlation Between Aker Solutions and TechnipFMC PLC

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

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

Diversification Opportunities for Aker Solutions and TechnipFMC PLC

0.19

Correlation Coefficient

Aker Solutions  TechnipFMC PLC

Average diversification

The 3 months correlation between Aker and TechnipFMC is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Aker Solutions ASA and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and Aker Solutions 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 Aker Solutions ASA 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 Aker Solutions i.e., Aker Solutions and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between Aker Solutions and TechnipFMC PLC

Assuming the 90 days horizon Aker Solutions ASA is expected to generate 11.98 times more return on investment than TechnipFMC PLC. However, Aker Solutions is 11.98 times more volatile than TechnipFMC PLC. It trades about 0.23 of its potential returns per unit of risk. TechnipFMC PLC is currently generating about -0.17 per unit of risk. If you would invest  553.00  in Aker Solutions ASA on September 24, 2024 and sell it today you would earn a total of  447.00  from holding Aker Solutions ASA or generate 80.83% return on investment over 90 days.

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

Aker Solutions ASA  vs.  TechnipFMC PLC

Aker Solutions ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Solutions ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Aker Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

TechnipFMC PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, TechnipFMC PLC is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aker Solutions and TechnipFMC PLC

The main advantage of trading using opposite Aker Solutions and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker Solutions 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 Aker Solutions ASA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.