Correlation Between TotalEnergies and Vallourec

Can any of the company-specific risk be diversified away by investing in both TotalEnergies and Vallourec 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 Vallourec 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 Vallourec, you can compare the effects of market volatilities on TotalEnergies and Vallourec 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 Vallourec. Check out your portfolio center. Please also check ongoing floating volatility patterns of TotalEnergies and Vallourec.

Diversification Opportunities for TotalEnergies and Vallourec

0.36

Correlation Coefficient

TotalEnergies  Vallourec

Weak diversification

The 3 months correlation between TotalEnergies and Vallourec is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies EP Gabon and Vallourec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vallourec 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 Vallourec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vallourec has no effect on the direction of TotalEnergies i.e., TotalEnergies and Vallourec go up and down completely randomly.

Pair Corralation between TotalEnergies and Vallourec

Assuming the 90 days horizon TotalEnergies is expected to generate 1.24 times less return on investment than Vallourec. In addition to that, TotalEnergies is 1.21 times more volatile than Vallourec. It trades about 0.09 of its total potential returns per unit of risk. Vallourec is currently generating about 0.14 per unit of volatility. If you would invest  1,382  in Vallourec on September 4, 2024 and sell it today you would earn a total of  257.00  from holding Vallourec or generate 18.6% return on investment over 90 days.

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

TotalEnergies EP Gabon  vs.  Vallourec

TotalEnergies EP Gabon

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies EP Gabon are ranked lower than 7 (%) 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.

Vallourec

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with TotalEnergies and Vallourec

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

The idea behind TotalEnergies EP Gabon and Vallourec 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.