Correlation Between TechnipFMC Plc and Charter Communications

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Can any of the company-specific risk be diversified away by investing in both TechnipFMC Plc and Charter Communications 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 Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TechnipFMC plc and Charter Communications, you can compare the effects of market volatilities on TechnipFMC Plc and Charter Communications 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 Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of TechnipFMC Plc and Charter Communications.

Diversification Opportunities for TechnipFMC Plc and Charter Communications

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between TechnipFMC and Charter is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC plc and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of TechnipFMC Plc i.e., TechnipFMC Plc and Charter Communications go up and down completely randomly.

Pair Corralation between TechnipFMC Plc and Charter Communications

Assuming the 90 days trading horizon TechnipFMC plc is expected to generate 0.89 times more return on investment than Charter Communications. However, TechnipFMC plc is 1.13 times less risky than Charter Communications. It trades about 0.11 of its potential returns per unit of risk. Charter Communications is currently generating about 0.03 per unit of risk. If you would invest  8,258  in TechnipFMC plc on October 4, 2024 and sell it today you would earn a total of  9,688  from holding TechnipFMC plc or generate 117.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.19%
ValuesDaily Returns

TechnipFMC plc  vs.  Charter Communications

 Performance 
       Timeline  
TechnipFMC plc 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC plc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, TechnipFMC Plc sustained solid returns over the last few months and may actually be approaching a breakup point.
Charter Communications 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Charter Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

TechnipFMC Plc and Charter Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TechnipFMC Plc and Charter Communications

The main advantage of trading using opposite TechnipFMC Plc and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TechnipFMC Plc position performs unexpectedly, Charter Communications 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 Charter Communications will offset losses from the drop in Charter Communications' long position.
The idea behind TechnipFMC plc and Charter Communications 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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