Correlation Between Repsol SA and Shell PLC

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

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

Diversification Opportunities for Repsol SA and Shell PLC

0.0

Correlation Coefficient

Repsol SA  Shell PLC

Pay attention - limited upside

The 3 months correlation between Repsol and Shell is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Repsol SA and Shell PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC and Repsol SA 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 Repsol SA 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 Repsol SA i.e., Repsol SA and Shell PLC go up and down completely randomly.

Pair Corralation between Repsol SA and Shell PLC

If you would invest  3,101  in Shell PLC on December 26, 2024 and sell it today you would earn a total of  474.00  from holding Shell PLC or generate 15.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Repsol SA  vs.  Shell PLC

Repsol SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Repsol SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Repsol SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shell PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shell PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Repsol SA and Shell PLC

The main advantage of trading using opposite Repsol SA and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repsol SA 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 Repsol SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.