Correlation Between Hua Hong and TotalEnergies

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

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

Diversification Opportunities for Hua Hong and TotalEnergies

0.46

Correlation Coefficient

Hua Hong  TotalEnergies

Very weak diversification

The 3 months correlation between Hua and TotalEnergies is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE and Hua Hong 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 Hua Hong Semiconductor 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 Hua Hong i.e., Hua Hong and TotalEnergies go up and down completely randomly.

Pair Corralation between Hua Hong and TotalEnergies

Assuming the 90 days horizon Hua Hong Semiconductor is expected to generate 3.15 times more return on investment than TotalEnergies. However, Hua Hong is 3.15 times more volatile than TotalEnergies SE. It trades about 0.16 of its potential returns per unit of risk. TotalEnergies SE is currently generating about 0.46 per unit of risk. If you would invest  272.00  in Hua Hong Semiconductor on October 25, 2024 and sell it today you would earn a total of  24.00  from holding Hua Hong Semiconductor or generate 8.82% return on investment over 90 days.

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

Hua Hong Semiconductor  vs.  TotalEnergies SE

Hua Hong Semiconductor

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Hong Semiconductor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hua Hong reported solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable basic indicators, TotalEnergies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hua Hong and TotalEnergies

The main advantage of trading using opposite Hua Hong and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Hong 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 Hua Hong Semiconductor 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.