Correlation Between TotalEnergies and Bouygues

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

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

Diversification Opportunities for TotalEnergies and Bouygues

0.68

Correlation Coefficient

TotalEnergies  Bouygues

Poor diversification

The 3 months correlation between TotalEnergies and Bouygues is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Bouygues SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouygues 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 Bouygues. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bouygues SA has no effect on the direction of TotalEnergies i.e., TotalEnergies and Bouygues go up and down completely randomly.

Pair Corralation between TotalEnergies and Bouygues

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the Bouygues. In addition to that, TotalEnergies is 1.03 times more volatile than Bouygues SA. It trades about -0.18 of its total potential returns per unit of risk. Bouygues SA is currently generating about -0.07 per unit of volatility. If you would invest  3,011  in Bouygues SA on October 2, 2024 and sell it today you would lose (157.00) from holding Bouygues SA or give up 5.21% 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.  Bouygues 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.

Bouygues SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bouygues SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bouygues 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 Bouygues

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

The idea behind TotalEnergies SE and Bouygues 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.