Correlation Between TechnipFMC PLC and BP Plc

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

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

Diversification Opportunities for TechnipFMC PLC and BP Plc

-0.85

Correlation Coefficient

TechnipFMC PLC  BP Plc

Pay attention - limited upside

The 3 months correlation between TechnipFMC and BP-A is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and BP Plc go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and BP Plc

Assuming the 90 days trading horizon TechnipFMC PLC is expected to generate 1.27 times more return on investment than BP Plc. However, TechnipFMC PLC is 1.27 times more volatile than BP plc. It trades about 0.51 of its potential returns per unit of risk. BP plc is currently generating about -0.19 per unit of risk. If you would invest  2,450  in TechnipFMC PLC on September 5, 2024 and sell it today you would earn a total of  555.00  from holding TechnipFMC PLC or generate 22.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

TechnipFMC PLC  vs.  BP plc

TechnipFMC PLC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TechnipFMC PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

BP plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BP plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with TechnipFMC PLC and BP Plc

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

The idea behind TechnipFMC PLC and BP 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.