Correlation Between TotalEnergies and Rolls Royce

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

By analyzing existing cross correlation between TotalEnergies SE and Rolls Royce Holdings plc, you can compare the effects of market volatilities on TotalEnergies and Rolls Royce 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 Rolls Royce. Check out your portfolio center. Please also check ongoing floating volatility patterns of TotalEnergies and Rolls Royce.

Diversification Opportunities for TotalEnergies and Rolls Royce

-0.39

Correlation Coefficient

TotalEnergies  Rolls Royce

Very good diversification

The 3 months correlation between TotalEnergies and Rolls is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Rolls Royce Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Holdings 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 Rolls Royce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Holdings has no effect on the direction of TotalEnergies i.e., TotalEnergies and Rolls Royce go up and down completely randomly.

Pair Corralation between TotalEnergies and Rolls Royce

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the Rolls Royce. But the stock apears to be less risky and, when comparing its historical volatility, TotalEnergies SE is 1.57 times less risky than Rolls Royce. The stock trades about -0.03 of its potential returns per unit of risk. The Rolls Royce Holdings plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  684.00  in Rolls Royce Holdings plc on October 20, 2024 and sell it today you would earn a total of  4.00  from holding Rolls Royce Holdings plc or generate 0.58% return on investment over 90 days.

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

TotalEnergies SE  vs.  Rolls Royce Holdings plc

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 nearly stable basic indicators, TotalEnergies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Rolls Royce Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Holdings plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rolls Royce is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TotalEnergies and Rolls Royce

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

The idea behind TotalEnergies SE and Rolls Royce Holdings plc 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.