Correlation Between China Petroleum and TotalEnergies
Can any of the company-specific risk be diversified away by investing in both China Petroleum 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 China Petroleum and TotalEnergies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Petroleum Chemical and TotalEnergies SE ADR, you can compare the effects of market volatilities on China Petroleum 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 China Petroleum with a short position of TotalEnergies. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Petroleum and TotalEnergies.
Diversification Opportunities for China Petroleum and TotalEnergies
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and TotalEnergies is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical 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 China Petroleum 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 China Petroleum Chemical 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 China Petroleum i.e., China Petroleum and TotalEnergies go up and down completely randomly.
Pair Corralation between China Petroleum and TotalEnergies
Assuming the 90 days horizon China Petroleum Chemical is expected to generate 2.67 times more return on investment than TotalEnergies. However, China Petroleum is 2.67 times more volatile than TotalEnergies SE ADR. It trades about -0.09 of its potential returns per unit of risk. TotalEnergies SE ADR is currently generating about -0.39 per unit of risk. If you would invest 58.00 in China Petroleum Chemical on August 28, 2024 and sell it today you would lose (4.00) from holding China Petroleum Chemical or give up 6.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Petroleum Chemical vs. TotalEnergies SE ADR
Performance |
| Timeline |
| China Petroleum Chemical |
| TotalEnergies SE ADR |
China Petroleum and TotalEnergies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Petroleum and TotalEnergies
The main advantage of trading using opposite China Petroleum and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petroleum 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.| China Petroleum vs. Equinor ASA ADR | China Petroleum vs. TotalEnergies SE ADR | China Petroleum vs. Ecopetrol SA ADR | China Petroleum vs. National Fuel Gas |
| TotalEnergies vs. BP PLC ADR | TotalEnergies vs. Chevron Corp | TotalEnergies vs. Exxon Mobil Corp | TotalEnergies vs. Equinor ASA ADR |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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