Correlation Between Chevron Corp and Shell PLC
Can any of the company-specific risk be diversified away by investing in both Chevron Corp 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 Chevron Corp and Shell PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Shell PLC, you can compare the effects of market volatilities on Chevron Corp 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 Chevron Corp with a short position of Shell PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Shell PLC.
Diversification Opportunities for Chevron Corp and Shell PLC
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chevron and Shell is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Shell PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC and Chevron Corp 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 Chevron Corp 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 Chevron Corp i.e., Chevron Corp and Shell PLC go up and down completely randomly.
Pair Corralation between Chevron Corp and Shell PLC
Considering the 90-day investment horizon Chevron Corp is expected to generate 1.78 times less return on investment than Shell PLC. But when comparing it to its historical volatility, Chevron Corp is 1.95 times less risky than Shell PLC. It trades about 0.03 of its potential returns per unit of risk. Shell PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,975 in Shell PLC on December 4, 2024 and sell it today you would earn a total of 365.00 from holding Shell PLC or generate 12.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Chevron Corp vs. Shell PLC
Performance |
Timeline |
Chevron Corp |
Shell PLC |
Chevron Corp and Shell PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chevron Corp and Shell PLC
The main advantage of trading using opposite Chevron Corp and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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.Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor Energy |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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