Correlation Between TechnipFMC PLC and USA Compression

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

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

Diversification Opportunities for TechnipFMC PLC and USA Compression

0.82

Correlation Coefficient

TechnipFMC PLC  USA Compression

Very poor diversification

The 3 months correlation between TechnipFMC and USA is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and USA Compression Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Compression Partners 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 USA Compression. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Compression Partners has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and USA Compression go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and USA Compression

Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 1.38 times less return on investment than USA Compression. In addition to that, TechnipFMC PLC is 1.4 times more volatile than USA Compression Partners. It trades about 0.01 of its total potential returns per unit of risk. USA Compression Partners is currently generating about 0.03 per unit of volatility. If you would invest  2,230  in USA Compression Partners on September 28, 2024 and sell it today you would earn a total of  76.00  from holding USA Compression Partners or generate 3.41% return on investment over 90 days.

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

TechnipFMC PLC  vs.  USA Compression Partners

TechnipFMC PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 7 (%) 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 January 2025.

USA Compression Partners

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in USA Compression Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, USA Compression 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 USA Compression

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

The idea behind TechnipFMC PLC and USA Compression Partners 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.