Correlation Between TotalEnergies and Compagnie

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

By analyzing existing cross correlation between TotalEnergies SE and Compagnie de Saint Gobain, you can compare the effects of market volatilities on TotalEnergies and Compagnie 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 TotalEnergies with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of TotalEnergies and Compagnie.

Diversification Opportunities for TotalEnergies and Compagnie

-0.54

Correlation Coefficient

TotalEnergies  Compagnie

Excellent diversification

The 3 months correlation between TotalEnergies and Compagnie is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and TotalEnergies 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 TotalEnergies SE are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of TotalEnergies i.e., TotalEnergies and Compagnie go up and down completely randomly.

Pair Corralation between TotalEnergies and Compagnie

Assuming the 90 days trading horizon TotalEnergies is expected to generate 5.3 times less return on investment than Compagnie. But when comparing it to its historical volatility, TotalEnergies SE is 1.15 times less risky than Compagnie. It trades about 0.02 of its potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,150  in Compagnie de Saint Gobain on August 17, 2024 and sell it today you would earn a total of  4,918  from holding Compagnie de Saint Gobain or generate 118.51% return on investment over 90 days.

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

TotalEnergies SE  vs.  Compagnie de Saint Gobain

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE 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.

Compagnie de Saint

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TotalEnergies and Compagnie

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

The idea behind TotalEnergies SE and Compagnie de Saint Gobain 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.