Correlation Between TechnipFMC PLC and Natural Gas

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

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

Diversification Opportunities for TechnipFMC PLC and Natural Gas

0.88

Correlation Coefficient

TechnipFMC PLC  Natural Gas

Very poor diversification

The 3 months correlation between TechnipFMC and Natural is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and Natural Gas Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Services 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 Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Services has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and Natural Gas go up and down completely randomly.

Pair Corralation between TechnipFMC PLC and Natural Gas

Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 1.48 times less return on investment than Natural Gas. But when comparing it to its historical volatility, TechnipFMC PLC is 1.28 times less risky than Natural Gas. It trades about 0.16 of its potential returns per unit of risk. Natural Gas Services is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,040  in Natural Gas Services on September 3, 2024 and sell it today you would earn a total of  736.00  from holding Natural Gas Services or generate 36.08% return on investment over 90 days.

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

TechnipFMC PLC  vs.  Natural Gas Services

TechnipFMC PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 12 (%) 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.

Natural Gas Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Gas Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Natural Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TechnipFMC PLC and Natural Gas

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

The idea behind TechnipFMC PLC and Natural Gas Services 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.