Correlation Between TotalEnergies and Micron Technology

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

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

Diversification Opportunities for TotalEnergies and Micron Technology

0.51

Correlation Coefficient

TotalEnergies  Micron Technology

Very weak diversification

The 3 months correlation between TotalEnergies and Micron is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of TotalEnergies i.e., TotalEnergies and Micron Technology go up and down completely randomly.

Pair Corralation between TotalEnergies and Micron Technology

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the Micron Technology. But the stock apears to be less risky and, when comparing its historical volatility, TotalEnergies SE is 2.33 times less risky than Micron Technology. The stock trades about -0.19 of its potential returns per unit of risk. The Micron Technology is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  196,873  in Micron Technology on October 7, 2024 and sell it today you would lose (10,686) from holding Micron Technology or give up 5.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

TotalEnergies SE  vs.  Micron Technology

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Micron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Micron Technology 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 Micron Technology

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

The idea behind TotalEnergies SE and Micron Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.