Correlation Between TechnipFMC PLC and Karnalyte Resources

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

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

Diversification Opportunities for TechnipFMC PLC and Karnalyte Resources

-0.46

Correlation Coefficient

TechnipFMC PLC  Karnalyte Resources

Very good diversification

The 3 months correlation between TechnipFMC and Karnalyte is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and Karnalyte Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karnalyte Resources 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 Karnalyte Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karnalyte Resources has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and Karnalyte Resources go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and Karnalyte Resources

Considering the 90-day investment horizon TechnipFMC PLC is expected to under-perform the Karnalyte Resources. But the stock apears to be less risky and, when comparing its historical volatility, TechnipFMC PLC is 2.38 times less risky than Karnalyte Resources. The stock trades about -0.18 of its potential returns per unit of risk. The Karnalyte Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Karnalyte Resources on March 7, 2024 and sell it today you would earn a total of  0.00  from holding Karnalyte Resources or generate 0.0% return on investment over 90 days.

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

TechnipFMC PLC  vs.  Karnalyte Resources

TechnipFMC PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, TechnipFMC PLC may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Karnalyte Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Karnalyte Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with TechnipFMC PLC and Karnalyte Resources

The main advantage of trading using opposite TechnipFMC PLC and Karnalyte Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TechnipFMC PLC position performs unexpectedly, Karnalyte Resources 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 Karnalyte Resources will offset losses from the drop in Karnalyte Resources' long position.

The idea behind TechnipFMC PLC and Karnalyte Resources 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.