Correlation Between Gear4music (Holdings) and Shell Plc

Can any of the company-specific risk be diversified away by investing in both Gear4music (Holdings) 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 Gear4music (Holdings) and Shell Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gear4music Plc and Shell plc, you can compare the effects of market volatilities on Gear4music (Holdings) 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 Gear4music (Holdings) with a short position of Shell Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear4music (Holdings) and Shell Plc.

Diversification Opportunities for Gear4music (Holdings) and Shell Plc

-0.66

Correlation Coefficient

Gear4music (Holdings)  Shell Plc

Excellent diversification

The 3 months correlation between Gear4music and Shell is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gear4music Plc and Shell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell plc and Gear4music (Holdings) 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 Gear4music 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 Gear4music (Holdings) i.e., Gear4music (Holdings) and Shell Plc go up and down completely randomly.

Pair Corralation between Gear4music (Holdings) and Shell Plc

Assuming the 90 days trading horizon Gear4music Plc is expected to under-perform the Shell Plc. In addition to that, Gear4music (Holdings) is 1.21 times more volatile than Shell plc. It trades about -0.25 of its total potential returns per unit of risk. Shell plc is currently generating about 0.17 per unit of volatility. If you would invest  242,868  in Shell plc on December 24, 2024 and sell it today you would earn a total of  29,832  from holding Shell plc or generate 12.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Gear4music Plc  vs.  Shell plc

Gear4music (Holdings)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gear4music Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Gear4music (Holdings) and Shell Plc

The main advantage of trading using opposite Gear4music (Holdings) and Shell Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear4music (Holdings) 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 Gear4music 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.