Correlation Between National Fuel and Shell PLC

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

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

Diversification Opportunities for National Fuel and Shell PLC

0.9

Correlation Coefficient

National Fuel  Shell PLC

Almost no diversification

The 3 months correlation between National and Shell is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding National Fuel Gas 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 National Fuel 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 National Fuel Gas 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 National Fuel i.e., National Fuel and Shell PLC go up and down completely randomly.

Pair Corralation between National Fuel and Shell PLC

Considering the 90-day investment horizon National Fuel Gas is expected to generate 1.02 times more return on investment than Shell PLC. However, National Fuel is 1.02 times more volatile than Shell PLC ADR. It trades about 0.4 of its potential returns per unit of risk. Shell PLC ADR is currently generating about 0.28 per unit of risk. If you would invest  6,044  in National Fuel Gas on December 29, 2024 and sell it today you would earn a total of  1,824  from holding National Fuel Gas or generate 30.18% return on investment over 90 days.

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

National Fuel Gas  vs.  Shell PLC ADR

National Fuel Gas

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in National Fuel Gas are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, National Fuel reported solid returns over the last few months and may actually be approaching a breakup point.

Shell PLC ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC ADR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Shell PLC disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Fuel and Shell PLC

The main advantage of trading using opposite National Fuel and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Fuel 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 National Fuel Gas 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.