Correlation Between TotalEnergies and Chevron Corp

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

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

Diversification Opportunities for TotalEnergies and Chevron Corp

-0.09

Correlation Coefficient

TotalEnergies  Chevron Corp

Good diversification

The 3 months correlation between TotalEnergies and Chevron is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of TotalEnergies i.e., TotalEnergies and Chevron Corp go up and down completely randomly.

Pair Corralation between TotalEnergies and Chevron Corp

Assuming the 90 days trading horizon TotalEnergies SE is expected to generate 1.58 times more return on investment than Chevron Corp. However, TotalEnergies is 1.58 times more volatile than Chevron Corp. It trades about -0.23 of its potential returns per unit of risk. Chevron Corp is currently generating about -0.47 per unit of risk. If you would invest  128,400  in TotalEnergies SE on September 23, 2024 and sell it today you would lose (14,420) from holding TotalEnergies SE or give up 11.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

TotalEnergies SE  vs.  Chevron Corp

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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chevron Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TotalEnergies and Chevron Corp

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

The idea behind TotalEnergies SE and Chevron Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.