Correlation Between Weatherford International and TechnipFMC PLC

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

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

Diversification Opportunities for Weatherford International and TechnipFMC PLC

0.5

Correlation Coefficient

Weatherford International  TechnipFMC PLC

Very weak diversification

The 3 months correlation between Weatherford and TechnipFMC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Weatherford International Plc and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and Weatherford International 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 Weatherford International Plc 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 Weatherford International i.e., Weatherford International and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between Weatherford International and TechnipFMC PLC

If you would invest  2,605  in TechnipFMC PLC on August 30, 2024 and sell it today you would earn a total of  496.00  from holding TechnipFMC PLC or generate 19.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.35%
Values	Daily Returns

Weatherford International Plc  vs.  TechnipFMC PLC

Weatherford International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weatherford International Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Weatherford International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

TechnipFMC PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, TechnipFMC PLC demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weatherford International and TechnipFMC PLC

The main advantage of trading using opposite Weatherford International and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weatherford International 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 Weatherford International Plc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.