Correlation Between TotalEnergies and Pershing Square

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

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

Diversification Opportunities for TotalEnergies and Pershing Square

-0.33

Correlation Coefficient

TotalEnergies  Pershing Square

Very good diversification

The 3 months correlation between TotalEnergies and Pershing is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square Holdings 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 Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of TotalEnergies i.e., TotalEnergies and Pershing Square go up and down completely randomly.

Pair Corralation between TotalEnergies and Pershing Square

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the Pershing Square. But the stock apears to be less risky and, when comparing its historical volatility, TotalEnergies SE is 1.18 times less risky than Pershing Square. The stock trades about -0.1 of its potential returns per unit of risk. The Pershing Square Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,316  in Pershing Square Holdings on September 19, 2024 and sell it today you would lose (396.00) from holding Pershing Square Holdings or give up 7.45% of portfolio value over 90 days.

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

TotalEnergies SE  vs.  Pershing Square Holdings

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 weak performance in the last few months, the Stock's technical and fundamental 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.

Pershing Square Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pershing Square Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Pershing Square is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TotalEnergies and Pershing Square

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

The idea behind TotalEnergies SE and Pershing Square Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.