Correlation Between TotalEnergies and PetroChina

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

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

Diversification Opportunities for TotalEnergies and PetroChina

0.62

Correlation Coefficient

TotalEnergies  PetroChina

Poor diversification

The 3 months correlation between TotalEnergies and PetroChina is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE ADR and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina 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 ADR are associated (or correlated) with PetroChina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroChina has no effect on the direction of TotalEnergies i.e., TotalEnergies and PetroChina go up and down completely randomly.

Pair Corralation between TotalEnergies and PetroChina

Considering the 90-day investment horizon TotalEnergies SE ADR is expected to under-perform the PetroChina. But the stock apears to be less risky and, when comparing its historical volatility, TotalEnergies SE ADR is 3.14 times less risky than PetroChina. The stock trades about -0.21 of its potential returns per unit of risk. The PetroChina Co Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  70.00  in PetroChina Co Ltd on September 16, 2024 and sell it today you would earn a total of  4.00  from holding PetroChina Co Ltd or generate 5.71% return on investment over 90 days.

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

TotalEnergies SE ADR  vs.  PetroChina Co Ltd

TotalEnergies SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PetroChina

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PetroChina may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TotalEnergies and PetroChina

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

The idea behind TotalEnergies SE ADR and PetroChina Co Ltd 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.