Correlation Between TotalEnergies and Covivio Hotels

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

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

Diversification Opportunities for TotalEnergies and Covivio Hotels

-0.32

Correlation Coefficient

TotalEnergies  Covivio Hotels

Very good diversification

The 3 months correlation between TotalEnergies and Covivio is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Covivio Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covivio Hotels 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 Covivio Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covivio Hotels has no effect on the direction of TotalEnergies i.e., TotalEnergies and Covivio Hotels go up and down completely randomly.

Pair Corralation between TotalEnergies and Covivio Hotels

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the Covivio Hotels. But the stock apears to be less risky and, when comparing its historical volatility, TotalEnergies SE is 1.85 times less risky than Covivio Hotels. The stock trades about -0.31 of its potential returns per unit of risk. The Covivio Hotels is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,850  in Covivio Hotels on September 25, 2024 and sell it today you would earn a total of  170.00  from holding Covivio Hotels or generate 9.19% 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.  Covivio Hotels

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.

Covivio Hotels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Covivio Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Covivio Hotels 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 Covivio Hotels

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

The idea behind TotalEnergies SE and Covivio Hotels 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.