Correlation Between Total Energy and Petrofac
Can any of the company-specific risk be diversified away by investing in both Total Energy and Petrofac 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 Total Energy and Petrofac into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Energy Services and Petrofac Ltd ADR, you can compare the effects of market volatilities on Total Energy and Petrofac 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 Total Energy with a short position of Petrofac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Energy and Petrofac.
Diversification Opportunities for Total Energy and Petrofac
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Total and Petrofac is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Total Energy Services and Petrofac Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrofac ADR and Total Energy 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 Total Energy Services are associated (or correlated) with Petrofac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrofac ADR has no effect on the direction of Total Energy i.e., Total Energy and Petrofac go up and down completely randomly.
Pair Corralation between Total Energy and Petrofac
Assuming the 90 days horizon Total Energy Services is expected to under-perform the Petrofac. But the pink sheet apears to be less risky and, when comparing its historical volatility, Total Energy Services is 7.47 times less risky than Petrofac. The pink sheet trades about -0.38 of its potential returns per unit of risk. The Petrofac Ltd ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Petrofac Ltd ADR on December 1, 2024 and sell it today you would earn a total of 0.04 from holding Petrofac Ltd ADR or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Energy Services vs. Petrofac Ltd ADR
Performance |
| Timeline |
| Total Energy Services |
| Petrofac ADR |
Total Energy and Petrofac Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Energy and Petrofac
The main advantage of trading using opposite Total Energy and Petrofac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Energy position performs unexpectedly, Petrofac 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 Petrofac will offset losses from the drop in Petrofac's long position.| Total Energy vs. Source Energy Services | Total Energy vs. Trican Well Service | Total Energy vs. STEP Energy Services | Total Energy vs. Koil Energy Solutions |
| Petrofac vs. Worley Parsons | Petrofac vs. Saipem SpA | Petrofac vs. SMG Industries | Petrofac vs. Bri Chem Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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