Correlation Between United States and TotalEnergies

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

By analyzing existing cross correlation between United States Steel and TotalEnergies SE, you can compare the effects of market volatilities on United States and TotalEnergies 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 United States with a short position of TotalEnergies. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and TotalEnergies.

Diversification Opportunities for United States and TotalEnergies

0.82

Correlation Coefficient

United States  TotalEnergies

Very poor diversification

The 3 months correlation between United and TotalEnergies is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE and United States 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 United States Steel are associated (or correlated) with TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE has no effect on the direction of United States i.e., United States and TotalEnergies go up and down completely randomly.

Pair Corralation between United States and TotalEnergies

Given the investment horizon of 90 days United States Steel is expected to generate 2.01 times more return on investment than TotalEnergies. However, United States is 2.01 times more volatile than TotalEnergies SE. It trades about 0.01 of its potential returns per unit of risk. TotalEnergies SE is currently generating about -0.06 per unit of risk. If you would invest  77,407  in United States Steel on October 22, 2024 and sell it today you would lose (2,007) from holding United States Steel or give up 2.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

United States Steel  vs.  TotalEnergies SE

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, United States is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 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 United States and TotalEnergies

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

The idea behind United States Steel and TotalEnergies SE 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.