Correlation Between TotalEnergies and Smcp SAS

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

By analyzing existing cross correlation between TotalEnergies EP Gabon and Smcp SAS, you can compare the effects of market volatilities on TotalEnergies and Smcp SAS 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 Smcp SAS. Check out your portfolio center. Please also check ongoing floating volatility patterns of TotalEnergies and Smcp SAS.

Diversification Opportunities for TotalEnergies and Smcp SAS

0.87

Correlation Coefficient

TotalEnergies  Smcp SAS

Very poor diversification

The 3 months correlation between TotalEnergies and Smcp is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies EP Gabon and Smcp SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smcp SAS 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 EP Gabon are associated (or correlated) with Smcp SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smcp SAS has no effect on the direction of TotalEnergies i.e., TotalEnergies and Smcp SAS go up and down completely randomly.

Pair Corralation between TotalEnergies and Smcp SAS

Assuming the 90 days horizon TotalEnergies EP Gabon is expected to generate 0.45 times more return on investment than Smcp SAS. However, TotalEnergies EP Gabon is 2.2 times less risky than Smcp SAS. It trades about 0.06 of its potential returns per unit of risk. Smcp SAS is currently generating about 0.01 per unit of risk. If you would invest  14,828  in TotalEnergies EP Gabon on September 26, 2024 and sell it today you would earn a total of  4,822  from holding TotalEnergies EP Gabon or generate 32.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.68%
Values	Daily Returns

TotalEnergies EP Gabon  vs.  Smcp SAS

TotalEnergies EP Gabon

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies EP Gabon are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TotalEnergies sustained solid returns over the last few months and may actually be approaching a breakup point.

Smcp SAS

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with TotalEnergies and Smcp SAS

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

The idea behind TotalEnergies EP Gabon and Smcp SAS 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.