Correlation Between PetroChina and TotalEnergies

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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

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between PetroChina and TotalEnergies is 0.59. 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 2.03 times more return on investment than TotalEnergies. However, PetroChina is 2.03 times more volatile than TotalEnergies SE. It trades about -0.02 of its potential returns per unit of risk. TotalEnergies SE is currently generating about -0.06 per unit of risk. If you would invest  86.00  in PetroChina Co Ltd on September 5, 2024 and sell it today you would lose (15.00) from holding PetroChina Co Ltd or give up 17.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

PetroChina Co Ltd  vs.  TotalEnergies SE

 Performance 
       Timeline  
PetroChina 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PetroChina Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PetroChina is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.
TotalEnergies SE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TotalEnergies SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PetroChina and TotalEnergies Volatility Contrast

   Predicted Return Density   
       Returns  

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.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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