Correlation Between TechnipFMC PLC and Landsea Homes

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

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

Diversification Opportunities for TechnipFMC PLC and Landsea Homes

-0.39

Correlation Coefficient

TechnipFMC PLC  Landsea Homes

Very good diversification

The 3 months correlation between TechnipFMC and Landsea is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and Landsea Homes Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landsea Homes Corp 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 Landsea Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landsea Homes Corp has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and Landsea Homes go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and Landsea Homes

Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 0.49 times more return on investment than Landsea Homes. However, TechnipFMC PLC is 2.03 times less risky than Landsea Homes. It trades about 0.01 of its potential returns per unit of risk. Landsea Homes Corp is currently generating about -0.2 per unit of risk. If you would invest  2,529  in TechnipFMC PLC on February 23, 2024 and sell it today you would earn a total of  10.00  from holding TechnipFMC PLC or generate 0.4% return on investment over 90 days.

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

TechnipFMC PLC  vs.  Landsea Homes Corp

TechnipFMC PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, TechnipFMC PLC demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Landsea Homes Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Landsea Homes Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TechnipFMC PLC and Landsea Homes

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

The idea behind TechnipFMC PLC and Landsea Homes Corp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.