Correlation Between Imperial Oil and TotalEnergies

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

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

Diversification Opportunities for Imperial Oil and TotalEnergies

-0.12

Correlation Coefficient

Imperial Oil  TotalEnergies

Good diversification

The 3 months correlation between Imperial and TotalEnergies is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil 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 Imperial Oil 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 Imperial Oil 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 Imperial Oil i.e., Imperial Oil and TotalEnergies go up and down completely randomly.

Pair Corralation between Imperial Oil and TotalEnergies

Considering the 90-day investment horizon Imperial Oil is expected to generate 1.33 times more return on investment than TotalEnergies. However, Imperial Oil is 1.33 times more volatile than TotalEnergies SE ADR. It trades about 0.03 of its potential returns per unit of risk. TotalEnergies SE ADR is currently generating about -0.15 per unit of risk. If you would invest  7,233  in Imperial Oil on September 1, 2024 and sell it today you would earn a total of  159.00  from holding Imperial Oil or generate 2.2% return on investment over 90 days.

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

Imperial Oil  vs.  TotalEnergies SE ADR

Imperial Oil

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Imperial Oil is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

TotalEnergies SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Imperial Oil and TotalEnergies

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

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.