Correlation Between TotalEnergies and Reliance Steel

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

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

Diversification Opportunities for TotalEnergies and Reliance Steel

0.48

Correlation Coefficient

TotalEnergies  Reliance Steel

Very weak diversification

The 3 months correlation between TotalEnergies and Reliance is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Reliance Steel Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Steel Aluminum and TotalEnergies 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 TotalEnergies SE are associated (or correlated) with Reliance Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Steel Aluminum has no effect on the direction of TotalEnergies i.e., TotalEnergies and Reliance Steel go up and down completely randomly.

Pair Corralation between TotalEnergies and Reliance Steel

Assuming the 90 days trading horizon TotalEnergies SE is expected to generate 0.98 times more return on investment than Reliance Steel. However, TotalEnergies SE is 1.02 times less risky than Reliance Steel. It trades about 0.16 of its potential returns per unit of risk. Reliance Steel Aluminum is currently generating about 0.03 per unit of risk. If you would invest  5,009  in TotalEnergies SE on December 27, 2024 and sell it today you would earn a total of  741.00  from holding TotalEnergies SE or generate 14.79% return on investment over 90 days.

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

TotalEnergies SE  vs.  Reliance Steel Aluminum

TotalEnergies SE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TotalEnergies reported solid returns over the last few months and may actually be approaching a breakup point.

Reliance Steel Aluminum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Steel Aluminum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reliance Steel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TotalEnergies and Reliance Steel

The main advantage of trading using opposite TotalEnergies and Reliance Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TotalEnergies position performs unexpectedly, Reliance Steel 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 Reliance Steel will offset losses from the drop in Reliance Steel's long position.

The idea behind TotalEnergies SE and Reliance Steel Aluminum 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.