Correlation Between TotalEnergies and Eni SPA

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

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

Diversification Opportunities for TotalEnergies and Eni SPA

0.92

Correlation Coefficient

TotalEnergies  Eni SPA

Almost no diversification

The 3 months correlation between TotalEnergies and Eni is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE ADR and Eni SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA ADR and TotalEnergies 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 TotalEnergies SE ADR are associated (or correlated) with Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA ADR has no effect on the direction of TotalEnergies i.e., TotalEnergies and Eni SPA go up and down completely randomly.

Pair Corralation between TotalEnergies and Eni SPA

Considering the 90-day investment horizon TotalEnergies SE ADR is expected to generate 0.85 times more return on investment than Eni SPA. However, TotalEnergies SE ADR is 1.18 times less risky than Eni SPA. It trades about 0.33 of its potential returns per unit of risk. Eni SpA ADR is currently generating about 0.13 per unit of risk. If you would invest  6,974  in TotalEnergies SE ADR on January 30, 2024 and sell it today you would earn a total of  482.00  from holding TotalEnergies SE ADR or generate 6.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

TotalEnergies SE ADR  vs.  Eni SpA ADR

TotalEnergies SE ADR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies SE ADR are ranked lower than 14 (%) 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 May 2024.

Eni SpA ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eni SpA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Eni SPA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with TotalEnergies and Eni SPA

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

The idea behind TotalEnergies SE ADR and Eni SpA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.