Correlation Between MOL PLC and TotalEnergies

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

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

Diversification Opportunities for MOL PLC and TotalEnergies

0.88

Correlation Coefficient

MOL PLC  TotalEnergies

Very poor diversification

The 3 months correlation between MOL and TotalEnergies is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding MOL PLC ADR 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 MOL PLC 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 MOL PLC ADR 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 MOL PLC i.e., MOL PLC and TotalEnergies go up and down completely randomly.

Pair Corralation between MOL PLC and TotalEnergies

Assuming the 90 days horizon MOL PLC is expected to generate 1.6 times less return on investment than TotalEnergies. In addition to that, MOL PLC is 1.97 times more volatile than TotalEnergies SE ADR. It trades about 0.11 of its total potential returns per unit of risk. TotalEnergies SE ADR is currently generating about 0.34 per unit of volatility. If you would invest  5,294  in TotalEnergies SE ADR on December 29, 2024 and sell it today you would earn a total of  1,224  from holding TotalEnergies SE ADR or generate 23.12% return on investment over 90 days.

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

MOL PLC ADR  vs.  TotalEnergies SE ADR

MOL PLC ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MOL PLC ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MOL PLC showed solid returns over the last few months and may actually be approaching a breakup point.

TotalEnergies SE ADR

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies SE ADR are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, TotalEnergies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MOL PLC and TotalEnergies

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

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.