Correlation Between Masco and TotalEnergies

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

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

Diversification Opportunities for Masco and TotalEnergies

-0.48

Correlation Coefficient

Masco  TotalEnergies

Very good diversification

The 3 months correlation between Masco and TotalEnergies is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Masco and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE and Masco 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 Masco 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 Masco i.e., Masco and TotalEnergies go up and down completely randomly.

Pair Corralation between Masco and TotalEnergies

Assuming the 90 days trading horizon Masco is expected to generate 0.05 times more return on investment than TotalEnergies. However, Masco is 21.26 times less risky than TotalEnergies. It trades about 0.16 of its potential returns per unit of risk. TotalEnergies SE is currently generating about -0.15 per unit of risk. If you would invest  114,242  in Masco on September 23, 2024 and sell it today you would earn a total of  584.00  from holding Masco or generate 0.51% return on investment over 90 days.

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

Masco  vs.  TotalEnergies SE

Masco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Masco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Masco and TotalEnergies

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

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.