Correlation Between Halliburton and TechnipFMC Plc

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Can any of the company-specific risk be diversified away by investing in both Halliburton and TechnipFMC 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 Halliburton and TechnipFMC Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Halliburton and TechnipFMC Plc, you can compare the effects of market volatilities on Halliburton and TechnipFMC 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 Halliburton with a short position of TechnipFMC Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Halliburton and TechnipFMC Plc.

Diversification Opportunities for Halliburton and TechnipFMC Plc

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Halliburton and TechnipFMC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Halliburton and TechnipFMC Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC Plc and Halliburton 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 Halliburton are associated (or correlated) with TechnipFMC Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC Plc has no effect on the direction of Halliburton i.e., Halliburton and TechnipFMC Plc go up and down completely randomly.

Pair Corralation between Halliburton and TechnipFMC Plc

Considering the 90-day investment horizon Halliburton is expected to generate 0.82 times more return on investment than TechnipFMC Plc. However, Halliburton is 1.21 times less risky than TechnipFMC Plc. It trades about 0.05 of its potential returns per unit of risk. TechnipFMC Plc is currently generating about 0.04 per unit of risk. If you would invest  1,612  in Halliburton on May 10, 2022 and sell it today you would earn a total of  1,196  from holding Halliburton or generate 74.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Halliburton  vs.  TechnipFMC Plc

 Performance (%) 
       Timeline  
Halliburton 
Halliburton Performance
0 of 100
Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. Even with sluggish performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in September 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Halliburton Price Channel

TechnipFMC Plc 
TechnipFMC Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly sluggish basic indicators, TechnipFMC Plc reported solid returns over the last few months and may actually be approaching a breakup point.

TechnipFMC Price Channel

Halliburton and TechnipFMC Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Halliburton and TechnipFMC Plc

The main advantage of trading using opposite Halliburton and TechnipFMC Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halliburton position performs unexpectedly, TechnipFMC 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 TechnipFMC Plc will offset losses from the drop in TechnipFMC Plc's long position.
The idea behind Halliburton and TechnipFMC 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.
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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