Correlation Between Exxon and TotalEnergies

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

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

Diversification Opportunities for Exxon and TotalEnergies

0.36

Correlation Coefficient

Exxon  TotalEnergies

Weak diversification

The 3 months correlation between Exxon and TotalEnergies is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and TotalEnergies SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE ADR and Exxon 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 Exxon Mobil Corp 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 ADR has no effect on the direction of Exxon i.e., Exxon and TotalEnergies go up and down completely randomly.

Pair Corralation between Exxon and TotalEnergies

Considering the 90-day investment horizon Exxon is expected to generate 4.3 times less return on investment than TotalEnergies. In addition to that, Exxon is 1.3 times more volatile than TotalEnergies SE ADR. It trades about 0.02 of its total potential returns per unit of risk. TotalEnergies SE ADR is currently generating about 0.13 per unit of volatility. If you would invest  5,892  in TotalEnergies SE ADR on November 28, 2024 and sell it today you would earn a total of  175.00  from holding TotalEnergies SE ADR or generate 2.97% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  TotalEnergies SE ADR

Exxon Mobil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

TotalEnergies SE ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies SE ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, TotalEnergies may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Exxon and TotalEnergies

The main advantage of trading using opposite Exxon and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp and TotalEnergies SE 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.