Correlation Between TechnipFMC PLC and SMG Industries

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

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

Diversification Opportunities for TechnipFMC PLC and SMG Industries

-0.23

Correlation Coefficient

TechnipFMC PLC  SMG Industries

Very good diversification

The 3 months correlation between TechnipFMC and SMG is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and SMG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMG Industries 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 SMG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMG Industries has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and SMG Industries go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and SMG Industries

Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 1.44 times less return on investment than SMG Industries. But when comparing it to its historical volatility, TechnipFMC PLC is 13.21 times less risky than SMG Industries. It trades about 0.07 of its potential returns per unit of risk. SMG Industries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  14.00  in SMG Industries on December 2, 2024 and sell it today you would lose (13.89) from holding SMG Industries or give up 99.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.25%
Values	Daily Returns

TechnipFMC PLC  vs.  SMG Industries

TechnipFMC PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days TechnipFMC PLC has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

SMG Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SMG Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, SMG Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TechnipFMC PLC and SMG Industries

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

The idea behind TechnipFMC PLC and SMG Industries 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..