Correlation Between MicroStrategy Incorporated and Shell PLC

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

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

Diversification Opportunities for MicroStrategy Incorporated and Shell PLC

-0.54

Correlation Coefficient

MicroStrategy Incorporated  Shell PLC

Excellent diversification

The 3 months correlation between MicroStrategy and Shell is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and Shell PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC and MicroStrategy Incorporated 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 MicroStrategy Incorporated 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 MicroStrategy Incorporated i.e., MicroStrategy Incorporated and Shell PLC go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and Shell PLC

Given the investment horizon of 90 days MicroStrategy Incorporated is expected to generate 2.54 times more return on investment than Shell PLC. However, MicroStrategy Incorporated is 2.54 times more volatile than Shell PLC. It trades about 0.28 of its potential returns per unit of risk. Shell PLC is currently generating about 0.0 per unit of risk. If you would invest  14,147  in MicroStrategy Incorporated on September 13, 2024 and sell it today you would earn a total of  26,993  from holding MicroStrategy Incorporated or generate 190.8% return on investment over 90 days.

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

MicroStrategy Incorporated  vs.  Shell PLC

MicroStrategy Incorporated

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, MicroStrategy Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Shell PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shell PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Shell PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MicroStrategy Incorporated and Shell PLC

The main advantage of trading using opposite MicroStrategy Incorporated and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroStrategy Incorporated 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 MicroStrategy Incorporated 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.