Correlation Between Endo International and Shell Plc

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

By analyzing existing cross correlation between Endo International PLC and Shell plc, you can compare the effects of market volatilities on Endo International and Shell Plc 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 Endo International with a short position of Shell Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endo International and Shell Plc.

Diversification Opportunities for Endo International and Shell Plc

0.43

Correlation Coefficient

Endo International  Shell Plc

Very weak diversification

The 3 months correlation between Endo and Shell is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Endo International PLC and Shell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell plc and Endo International 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 Endo International PLC are associated (or correlated) with Shell Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell plc has no effect on the direction of Endo International i.e., Endo International and Shell Plc go up and down completely randomly.

Pair Corralation between Endo International and Shell Plc

Assuming the 90 days trading horizon Endo International PLC is expected to generate 0.98 times more return on investment than Shell Plc. However, Endo International PLC is 1.02 times less risky than Shell Plc. It trades about 0.3 of its potential returns per unit of risk. Shell plc is currently generating about 0.17 per unit of risk. If you would invest  59,632  in Endo International PLC on December 24, 2024 and sell it today you would earn a total of  12,835  from holding Endo International PLC or generate 21.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Endo International PLC  vs.  Shell plc

Endo International PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Endo International PLC are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Endo International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Shell plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shell plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Shell Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Endo International and Shell Plc

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

The idea behind Endo International PLC and Shell plc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.