Correlation Between BP PLC and TotalEnergies
Can any of the company-specific risk be diversified away by investing in both BP PLC 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 BP PLC and TotalEnergies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP PLC DZ1 and TotalEnergies SE, you can compare the effects of market volatilities on BP PLC 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 BP PLC with a short position of TotalEnergies. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and TotalEnergies.
Diversification Opportunities for BP PLC and TotalEnergies
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BPE and TotalEnergies is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC DZ1 and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE and BP PLC 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 BP PLC DZ1 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 BP PLC i.e., BP PLC and TotalEnergies go up and down completely randomly.
Pair Corralation between BP PLC and TotalEnergies
Assuming the 90 days horizon BP PLC DZ1 is expected to generate 1.83 times more return on investment than TotalEnergies. However, BP PLC is 1.83 times more volatile than TotalEnergies SE. It trades about 0.04 of its potential returns per unit of risk. TotalEnergies SE is currently generating about -0.19 per unit of risk. If you would invest 442.00 in BP PLC DZ1 on September 1, 2024 and sell it today you would earn a total of 6.00 from holding BP PLC DZ1 or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP PLC DZ1 vs. TotalEnergies SE
Performance |
| Timeline |
| BP PLC DZ1 |
| TotalEnergies SE |
BP PLC and TotalEnergies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP PLC and TotalEnergies
The main advantage of trading using opposite BP PLC and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC 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 BP PLC DZ1 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.| TotalEnergies vs. GFL ENVIRONM | TotalEnergies vs. BLUESCOPE STEEL | TotalEnergies vs. CeoTronics AG | TotalEnergies vs. Perdoceo Education |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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