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, 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 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE 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 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 1.74 times more return on investment than TotalEnergies. However, PetroChina is 1.74 times more volatile than TotalEnergies SE. It trades about 0.06 of its potential returns per unit of risk. TotalEnergies SE is currently generating about 0.01 per unit of risk. If you would invest  36.00  in PetroChina Co Ltd on September 11, 2024 and sell it today you would earn a total of  39.00  from holding PetroChina Co Ltd or generate 108.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

PetroChina Co Ltd  vs.  TotalEnergies SE

PetroChina

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PetroChina Co Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PetroChina reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.