Correlation Between PetroChina and TotalEnergies

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

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

Diversification Opportunities for PetroChina and TotalEnergies

0.56

Correlation Coefficient

PetroChina  TotalEnergies

Very weak diversification

The 3 months correlation between PetroChina and TotalEnergies is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd 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 PetroChina 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 PetroChina Co Ltd 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 PetroChina i.e., PetroChina and TotalEnergies go up and down completely randomly.

Pair Corralation between PetroChina and TotalEnergies

Assuming the 90 days horizon PetroChina Co Ltd is expected to generate 3.11 times more return on investment than TotalEnergies. However, PetroChina is 3.11 times more volatile than TotalEnergies SE ADR. It trades about 0.05 of its potential returns per unit of risk. TotalEnergies SE ADR is currently generating about -0.19 per unit of risk. If you would invest  70.00  in PetroChina Co Ltd on September 14, 2024 and sell it today you would earn a total of  5.00  from holding PetroChina Co Ltd or generate 7.14% return on investment over 90 days.

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

PetroChina Co Ltd  vs.  TotalEnergies SE ADR

PetroChina

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, PetroChina may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with PetroChina and TotalEnergies

The main advantage of trading using opposite PetroChina and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina 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 PetroChina Co Ltd 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.