Correlation Between TotalEnergies and ScanSource

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

By analyzing existing cross correlation between TotalEnergies SE and ScanSource, you can compare the effects of market volatilities on TotalEnergies and ScanSource 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 ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of TotalEnergies and ScanSource.

Diversification Opportunities for TotalEnergies and ScanSource

-0.59

Correlation Coefficient

TotalEnergies  ScanSource

Excellent diversification

The 3 months correlation between TotalEnergies and ScanSource is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 are associated (or correlated) with ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of TotalEnergies i.e., TotalEnergies and ScanSource go up and down completely randomly.

Pair Corralation between TotalEnergies and ScanSource

Assuming the 90 days trading horizon TotalEnergies SE is expected to under-perform the ScanSource. But the stock apears to be less risky and, when comparing its historical volatility, TotalEnergies SE is 2.24 times less risky than ScanSource. The stock trades about -0.22 of its potential returns per unit of risk. The ScanSource is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,980  in ScanSource on September 5, 2024 and sell it today you would earn a total of  740.00  from holding ScanSource or generate 18.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

TotalEnergies SE  vs.  ScanSource

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ScanSource

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ScanSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TotalEnergies and ScanSource

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

The idea behind TotalEnergies SE and ScanSource 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.