Correlation Between TotalEnergies and Derichebourg

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

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

Diversification Opportunities for TotalEnergies and Derichebourg

-0.53

Correlation Coefficient

TotalEnergies  Derichebourg

Excellent diversification

The 3 months correlation between TotalEnergies and Derichebourg is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies EP Gabon and Derichebourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derichebourg 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 EP Gabon are associated (or correlated) with Derichebourg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derichebourg has no effect on the direction of TotalEnergies i.e., TotalEnergies and Derichebourg go up and down completely randomly.

Pair Corralation between TotalEnergies and Derichebourg

Assuming the 90 days horizon TotalEnergies EP Gabon is expected to generate 0.92 times more return on investment than Derichebourg. However, TotalEnergies EP Gabon is 1.08 times less risky than Derichebourg. It trades about 0.11 of its potential returns per unit of risk. Derichebourg is currently generating about 0.0 per unit of risk. If you would invest  15,750  in TotalEnergies EP Gabon on September 17, 2024 and sell it today you would earn a total of  2,800  from holding TotalEnergies EP Gabon or generate 17.78% return on investment over 90 days.

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

TotalEnergies EP Gabon  vs.  Derichebourg

TotalEnergies EP Gabon

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies EP Gabon are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TotalEnergies sustained solid returns over the last few months and may actually be approaching a breakup point.

Derichebourg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Derichebourg has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Derichebourg is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TotalEnergies and Derichebourg

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

The idea behind TotalEnergies EP Gabon and Derichebourg 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.