Correlation Between TechnipFMC PLC and SCI Engineered

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

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

Diversification Opportunities for TechnipFMC PLC and SCI Engineered

-0.28

Correlation Coefficient

TechnipFMC PLC  SCI Engineered

Very good diversification

The 3 months correlation between TechnipFMC and SCI is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and SCI Engineered Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Engineered Materials 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 SCI Engineered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Engineered Materials has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and SCI Engineered go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and SCI Engineered

Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 0.82 times more return on investment than SCI Engineered. However, TechnipFMC PLC is 1.22 times less risky than SCI Engineered. It trades about 0.2 of its potential returns per unit of risk. SCI Engineered Materials is currently generating about 0.01 per unit of risk. If you would invest  2,388  in TechnipFMC PLC on September 12, 2024 and sell it today you would earn a total of  705.00  from holding TechnipFMC PLC or generate 29.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

TechnipFMC PLC  vs.  SCI Engineered Materials

TechnipFMC PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, TechnipFMC PLC demonstrated solid returns over the last few months and may actually be approaching a breakup point.

SCI Engineered Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCI Engineered Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, SCI Engineered is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TechnipFMC PLC and SCI Engineered

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

The idea behind TechnipFMC PLC and SCI Engineered Materials 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.