Correlation Between TechnipFMC PLC and REX American
Can any of the company-specific risk be diversified away by investing in both TechnipFMC PLC and REX American 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 REX American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TechnipFMC PLC and REX American Resources, you can compare the effects of market volatilities on TechnipFMC PLC and REX American 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 REX American. Check out your portfolio center. Please also check ongoing floating volatility patterns of TechnipFMC PLC and REX American.
Diversification Opportunities for TechnipFMC PLC and REX American
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TechnipFMC and REX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and REX American Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX American 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 REX American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX American Resources has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and REX American go up and down completely randomly.
Pair Corralation between TechnipFMC PLC and REX American
Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 0.7 times more return on investment than REX American. However, TechnipFMC PLC is 1.43 times less risky than REX American. It trades about -0.01 of its potential returns per unit of risk. REX American Resources is currently generating about -0.33 per unit of risk. If you would invest 2,631 in TechnipFMC PLC on March 5, 2024 and sell it today you would lose (12.00) from holding TechnipFMC PLC or give up 0.46% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
TechnipFMC PLC vs. REX American Resources
Performance |
Timeline |
TechnipFMC PLC |
REX American Resources |
TechnipFMC PLC and REX American Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with TechnipFMC PLC and REX American
The main advantage of trading using opposite TechnipFMC PLC and REX American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TechnipFMC PLC position performs unexpectedly, REX American 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 REX American will offset losses from the drop in REX American's long position.The idea behind TechnipFMC PLC and REX American 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.REX American vs. Lsb Industries | REX American vs. AdvanSix | REX American vs. Tronox Holdings PLC | REX American vs. Methanex |
Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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