Correlation Between Empire State and Shell PLC

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

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

Diversification Opportunities for Empire State and Shell PLC

-0.53

Correlation Coefficient

Empire State  Shell PLC

Excellent diversification

The 3 months correlation between Empire and Shell is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Shell PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC ADR and Empire State 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 Empire State Realty 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 ADR has no effect on the direction of Empire State i.e., Empire State and Shell PLC go up and down completely randomly.

Pair Corralation between Empire State and Shell PLC

Given the investment horizon of 90 days Empire State Realty is expected to under-perform the Shell PLC. In addition to that, Empire State is 1.45 times more volatile than Shell PLC ADR. It trades about -0.22 of its total potential returns per unit of risk. Shell PLC ADR is currently generating about 0.08 per unit of volatility. If you would invest  6,405  in Shell PLC ADR on November 28, 2024 and sell it today you would earn a total of  337.00  from holding Shell PLC ADR or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Empire State Realty  vs.  Shell PLC ADR

Empire State Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empire State Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Shell PLC ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Shell PLC is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Empire State and Shell PLC

The main advantage of trading using opposite Empire State and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State 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 Empire State Realty and Shell PLC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.