Correlation Between Soitec SA and TotalEnergies

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

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

Diversification Opportunities for Soitec SA and TotalEnergies

-0.07

Correlation Coefficient

Soitec SA  TotalEnergies

Good diversification

The 3 months correlation between Soitec and TotalEnergies is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Soitec SA and TotalEnergies EP Gabon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies EP Gabon and Soitec SA 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 Soitec SA 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 EP Gabon has no effect on the direction of Soitec SA i.e., Soitec SA and TotalEnergies go up and down completely randomly.

Pair Corralation between Soitec SA and TotalEnergies

Assuming the 90 days trading horizon Soitec SA is expected to under-perform the TotalEnergies. In addition to that, Soitec SA is 1.54 times more volatile than TotalEnergies EP Gabon. It trades about -0.11 of its total potential returns per unit of risk. TotalEnergies EP Gabon is currently generating about 0.11 per unit of volatility. If you would invest  15,900  in TotalEnergies EP Gabon on September 5, 2024 and sell it today you would earn a total of  2,750  from holding TotalEnergies EP Gabon or generate 17.3% return on investment over 90 days.

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

Soitec SA  vs.  TotalEnergies EP Gabon

Soitec SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soitec SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TotalEnergies EP Gabon

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies EP Gabon are ranked lower than 8 (%) 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.

Pair Trading with Soitec SA and TotalEnergies

The main advantage of trading using opposite Soitec SA and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Soitec SA 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 Soitec SA and TotalEnergies EP Gabon 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.