Correlation Between NOV and TechnipFMC PLC

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

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

Diversification Opportunities for NOV and TechnipFMC PLC

0.44

Correlation Coefficient

NOV  TechnipFMC PLC

Very weak diversification

The 3 months correlation between NOV and TechnipFMC is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and NOV 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 NOV Inc 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 NOV i.e., NOV and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between NOV and TechnipFMC PLC

Assuming the 90 days horizon NOV Inc is expected to under-perform the TechnipFMC PLC. In addition to that, NOV is 1.02 times more volatile than TechnipFMC PLC. It trades about -0.02 of its total potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.09 per unit of volatility. If you would invest  1,062  in TechnipFMC PLC on September 24, 2024 and sell it today you would earn a total of  1,698  from holding TechnipFMC PLC or generate 159.89% return on investment over 90 days.

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

NOV Inc  vs.  TechnipFMC PLC

NOV Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOV Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

TechnipFMC PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TechnipFMC PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NOV and TechnipFMC PLC

The main advantage of trading using opposite NOV and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOV 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 NOV Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.