Correlation Between TotalEnergies and IShares Trust

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

By analyzing existing cross correlation between TotalEnergies SE and iShares Trust , you can compare the effects of market volatilities on TotalEnergies and IShares Trust 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of TotalEnergies and IShares Trust.

Diversification Opportunities for TotalEnergies and IShares Trust

0.76

Correlation Coefficient

TotalEnergies  IShares Trust

Poor diversification

The 3 months correlation between TotalEnergies and IShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of TotalEnergies i.e., TotalEnergies and IShares Trust go up and down completely randomly.

Pair Corralation between TotalEnergies and IShares Trust

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the IShares Trust. But the stock apears to be less risky and, when comparing its historical volatility, TotalEnergies SE is 1.54 times less risky than IShares Trust. The stock trades about -0.01 of its potential returns per unit of risk. The iShares Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  135,137  in iShares Trust on September 28, 2024 and sell it today you would earn a total of  36,663  from holding iShares Trust or generate 27.13% return on investment over 90 days.

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

TotalEnergies SE  vs.  iShares Trust

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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly 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.

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with TotalEnergies and IShares Trust

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

The idea behind TotalEnergies SE and iShares Trust 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.