Correlation Between Intermediate Capital and TechnipFMC PLC

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

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

Diversification Opportunities for Intermediate Capital and TechnipFMC PLC

-0.28

Correlation Coefficient

Intermediate Capital  TechnipFMC PLC

Very good diversification

The 3 months correlation between Intermediate and TechnipFMC is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Capital Group and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and Intermediate Capital 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 Intermediate Capital Group 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 Intermediate Capital i.e., Intermediate Capital and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between Intermediate Capital and TechnipFMC PLC

Assuming the 90 days trading horizon Intermediate Capital Group is expected to under-perform the TechnipFMC PLC. But the stock apears to be less risky and, when comparing its historical volatility, Intermediate Capital Group is 1.1 times less risky than TechnipFMC PLC. The stock trades about -0.04 of its potential returns per unit of risk. The TechnipFMC PLC is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,207  in TechnipFMC PLC on September 14, 2024 and sell it today you would earn a total of  724.00  from holding TechnipFMC PLC or generate 32.8% return on investment over 90 days.

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

Intermediate Capital Group  vs.  TechnipFMC PLC

Intermediate Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Intermediate Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

TechnipFMC PLC

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TechnipFMC PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intermediate Capital and TechnipFMC PLC

The main advantage of trading using opposite Intermediate Capital and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Capital 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 Intermediate Capital Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.