Correlation Between Cboe UK and TotalEnergies

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

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

Diversification Opportunities for Cboe UK and TotalEnergies

-0.03

Correlation Coefficient

Cboe UK  TotalEnergies

Good diversification

The 3 months correlation between Cboe and TotalEnergies is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE and Cboe UK 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 Cboe UK Consumer 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 Cboe UK i.e., Cboe UK and TotalEnergies go up and down completely randomly.

Pair Corralation between Cboe UK and TotalEnergies

Assuming the 90 days trading horizon Cboe UK Consumer is expected to under-perform the TotalEnergies. But the index apears to be less risky and, when comparing its historical volatility, Cboe UK Consumer is 2.17 times less risky than TotalEnergies. The index trades about -0.14 of its potential returns per unit of risk. The TotalEnergies SE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,118  in TotalEnergies SE on December 28, 2024 and sell it today you would earn a total of  842.00  from holding TotalEnergies SE or generate 16.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Cboe UK Consumer  vs.  TotalEnergies SE

Pair Trading with Cboe UK and TotalEnergies

The main advantage of trading using opposite Cboe UK and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cboe UK 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 Cboe UK Consumer 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.