Correlation Between Adams Resources and TotalEnergies

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

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

Diversification Opportunities for Adams Resources and TotalEnergies

0.78

Correlation Coefficient

Adams Resources  TotalEnergies

Poor diversification

The 3 months correlation between Adams and TotalEnergies is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy and TotalEnergies SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE ADR and Adams Resources 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 Adams Resources Energy 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 ADR has no effect on the direction of Adams Resources i.e., Adams Resources and TotalEnergies go up and down completely randomly.

Pair Corralation between Adams Resources and TotalEnergies

Allowing for the 90-day total investment horizon Adams Resources is expected to generate 3.85 times less return on investment than TotalEnergies. But when comparing it to its historical volatility, Adams Resources Energy is 2.12 times less risky than TotalEnergies. It trades about 0.17 of its potential returns per unit of risk. TotalEnergies SE ADR is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  5,294  in TotalEnergies SE ADR on December 30, 2024 and sell it today you would earn a total of  1,121  from holding TotalEnergies SE ADR or generate 21.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	40.32%
Values	Daily Returns

Adams Resources Energy  vs.  TotalEnergies SE ADR

Adams Resources Energy

Risk-Adjusted Performance

Good

Over the last 90 days Adams Resources Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adams Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

TotalEnergies SE ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies SE ADR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, TotalEnergies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adams Resources and TotalEnergies

The main advantage of trading using opposite Adams Resources and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Resources 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 Adams Resources Energy and TotalEnergies SE ADR 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 Global Correlations module to find global opportunities by holding instruments from different markets.