Correlation Between TechnipFMC PLC and National Energy

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

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

Diversification Opportunities for TechnipFMC PLC and National Energy

-0.53

Correlation Coefficient

TechnipFMC PLC  National Energy

Excellent diversification

The 3 months correlation between TechnipFMC and National is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and National Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Energy Services 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 National Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Energy Services has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and National Energy go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and National Energy

Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 0.63 times more return on investment than National Energy. However, TechnipFMC PLC is 1.6 times less risky than National Energy. It trades about 0.09 of its potential returns per unit of risk. National Energy Services is currently generating about 0.03 per unit of risk. If you would invest  1,272  in TechnipFMC PLC on October 4, 2024 and sell it today you would earn a total of  1,685  from holding TechnipFMC PLC or generate 132.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

TechnipFMC PLC  vs.  National Energy Services

TechnipFMC PLC

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, TechnipFMC PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

National Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, National Energy is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with TechnipFMC PLC and National Energy

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

The idea behind TechnipFMC PLC and National Energy Services 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.