Correlation Between Eni SpA and TotalEnergies

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

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

Diversification Opportunities for Eni SpA and TotalEnergies

0.26

Correlation Coefficient

Eni SpA  TotalEnergies

Modest diversification

The 3 months correlation between Eni and TotalEnergies is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE and Eni SpA 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 Eni SpA are associated (or correlated) with TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE has no effect on the direction of Eni SpA i.e., Eni SpA and TotalEnergies go up and down completely randomly.

Pair Corralation between Eni SpA and TotalEnergies

Assuming the 90 days horizon Eni SpA is expected to generate 1.57 times more return on investment than TotalEnergies. However, Eni SpA is 1.57 times more volatile than TotalEnergies SE. It trades about -0.05 of its potential returns per unit of risk. TotalEnergies SE is currently generating about -0.15 per unit of risk. If you would invest  1,559  in Eni SpA on September 16, 2024 and sell it today you would lose (168.00) from holding Eni SpA or give up 10.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.85%
Values	Daily Returns

Eni SpA  vs.  TotalEnergies SE

Eni SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eni SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eni SpA and TotalEnergies

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

The idea behind Eni SpA and TotalEnergies SE 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.