Correlation Between TotalEnergies and BNP Paribas

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

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

Diversification Opportunities for TotalEnergies and BNP Paribas

0.71

Correlation Coefficient

TotalEnergies  BNP Paribas

Poor diversification

The 3 months correlation between TotalEnergies and BNP is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and BNP Paribas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNP Paribas SA 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 BNP Paribas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNP Paribas SA has no effect on the direction of TotalEnergies i.e., TotalEnergies and BNP Paribas go up and down completely randomly.

Pair Corralation between TotalEnergies and BNP Paribas

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the BNP Paribas. But the stock apears to be less risky and, when comparing its historical volatility, TotalEnergies SE is 1.1 times less risky than BNP Paribas. The stock trades about -0.11 of its potential returns per unit of risk. The BNP Paribas SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  6,056  in BNP Paribas SA on September 23, 2024 and sell it today you would lose (308.00) from holding BNP Paribas SA or give up 5.09% of portfolio value over 90 days.

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

TotalEnergies SE  vs.  BNP Paribas SA

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat 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.

BNP Paribas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BNP Paribas SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TotalEnergies and BNP Paribas

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

The idea behind TotalEnergies SE and BNP Paribas SA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.