Correlation Between TechnipFMC PLC and MRC Global

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

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

Diversification Opportunities for TechnipFMC PLC and MRC Global

0.77

Correlation Coefficient

TechnipFMC PLC  MRC Global

Poor diversification

The 3 months correlation between TechnipFMC and MRC is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and MRC Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRC Global 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 MRC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRC Global has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and MRC Global go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and MRC Global

Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 0.87 times more return on investment than MRC Global. However, TechnipFMC PLC is 1.15 times less risky than MRC Global. It trades about 0.02 of its potential returns per unit of risk. MRC Global is currently generating about 0.0 per unit of risk. If you would invest  2,858  in TechnipFMC PLC on December 19, 2024 and sell it today you would earn a total of  28.00  from holding TechnipFMC PLC or generate 0.98% return on investment over 90 days.

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

TechnipFMC PLC  vs.  MRC Global

TechnipFMC PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 1 (%) 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.

MRC Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days MRC Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MRC Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with TechnipFMC PLC and MRC Global

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

The idea behind TechnipFMC PLC and MRC Global 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.