Correlation Between TotalEnergies and Equinor ASA

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

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

Diversification Opportunities for TotalEnergies and Equinor ASA

0.49

Correlation Coefficient

TotalEnergies  Equinor ASA

Very weak diversification

The 3 months correlation between TotalEnergies and Equinor is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Equinor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA ADR 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA ADR has no effect on the direction of TotalEnergies i.e., TotalEnergies and Equinor ASA go up and down completely randomly.

Pair Corralation between TotalEnergies and Equinor ASA

Assuming the 90 days horizon TotalEnergies SE is expected to under-perform the Equinor ASA. But the pink sheet apears to be less risky and, when comparing its historical volatility, TotalEnergies SE is 1.1 times less risky than Equinor ASA. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Equinor ASA ADR is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,423  in Equinor ASA ADR on September 12, 2024 and sell it today you would lose (39.00) from holding Equinor ASA ADR or give up 1.61% of portfolio value over 90 days.

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

TotalEnergies SE  vs.  Equinor ASA ADR

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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Equinor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinor ASA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equinor ASA is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with TotalEnergies and Equinor ASA

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

The idea behind TotalEnergies SE and Equinor ASA ADR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.