Correlation Between HK Electric and TechnipFMC PLC

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

By analyzing existing cross correlation between HK Electric Investments and TechnipFMC PLC, you can compare the effects of market volatilities on HK Electric and TechnipFMC PLC 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 HK Electric with a short position of TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and TechnipFMC PLC.

Diversification Opportunities for HK Electric and TechnipFMC PLC

0.68

Correlation Coefficient

HK Electric  TechnipFMC PLC

Poor diversification

The 3 months correlation between HKT and TechnipFMC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and HK Electric 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 HK Electric Investments are associated (or correlated) with TechnipFMC PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC PLC has no effect on the direction of HK Electric i.e., HK Electric and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between HK Electric and TechnipFMC PLC

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 1.32 times more return on investment than TechnipFMC PLC. However, HK Electric is 1.32 times more volatile than TechnipFMC PLC. It trades about 0.12 of its potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.06 per unit of risk. If you would invest  43.00  in HK Electric Investments on September 27, 2024 and sell it today you would earn a total of  21.00  from holding HK Electric Investments or generate 48.84% return on investment over 90 days.

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

HK Electric Investments  vs.  TechnipFMC PLC

HK Electric Investments

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HK Electric is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

TechnipFMC PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TechnipFMC PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HK Electric and TechnipFMC PLC

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

The idea behind HK Electric Investments and TechnipFMC PLC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.