Correlation Between FMC and TotalEnergies

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

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

Diversification Opportunities for FMC and TotalEnergies

0.51

Correlation Coefficient

FMC  TotalEnergies

Very weak diversification

The 3 months correlation between FMC and TotalEnergies is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE and FMC 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 FMC Corporation 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 FMC i.e., FMC and TotalEnergies go up and down completely randomly.

Pair Corralation between FMC and TotalEnergies

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the TotalEnergies. But the stock apears to be less risky and, when comparing its historical volatility, FMC Corporation is 1.19 times less risky than TotalEnergies. The stock trades about -0.39 of its potential returns per unit of risk. The TotalEnergies SE is currently generating about -0.31 of returns per unit of risk over similar time horizon. If you would invest  128,400  in TotalEnergies SE on October 5, 2024 and sell it today you would lose (19,450) from holding TotalEnergies SE or give up 15.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

FMC Corp.  vs.  TotalEnergies SE

FMC Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with FMC and TotalEnergies

The main advantage of trading using opposite FMC and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FMC 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 FMC Corporation 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.