Correlation Between Valaris and TechnipFMC PLC

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

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

Diversification Opportunities for Valaris and TechnipFMC PLC

0.83

Correlation Coefficient

Valaris  TechnipFMC PLC

Very poor diversification

The 3 months correlation between Valaris and TechnipFMC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Valaris and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and Valaris 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 Valaris 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 Valaris i.e., Valaris and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between Valaris and TechnipFMC PLC

Considering the 90-day investment horizon Valaris is expected to under-perform the TechnipFMC PLC. In addition to that, Valaris is 1.3 times more volatile than TechnipFMC PLC. It trades about -0.03 of its total potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.07 per unit of volatility. If you would invest  2,890  in TechnipFMC PLC on December 30, 2024 and sell it today you would earn a total of  228.00  from holding TechnipFMC PLC or generate 7.89% return on investment over 90 days.

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

Valaris  vs.  TechnipFMC PLC

Valaris

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valaris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Valaris is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

TechnipFMC PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 5 (%) 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 April 2025.

Pair Trading with Valaris and TechnipFMC PLC

The main advantage of trading using opposite Valaris and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valaris 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 Valaris 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.