Correlation Between Shell Pakistan and Invest Capital

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

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

Diversification Opportunities for Shell Pakistan and Invest Capital

0.23

Correlation Coefficient

Shell Pakistan  Invest Capital

Modest diversification

The 3 months correlation between Shell and Invest is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Shell Pakistan and Invest Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invest Capital Investment and Shell Pakistan 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 Shell Pakistan are associated (or correlated) with Invest Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invest Capital Investment has no effect on the direction of Shell Pakistan i.e., Shell Pakistan and Invest Capital go up and down completely randomly.

Pair Corralation between Shell Pakistan and Invest Capital

Assuming the 90 days trading horizon Shell Pakistan is expected to generate 1.04 times more return on investment than Invest Capital. However, Shell Pakistan is 1.04 times more volatile than Invest Capital Investment. It trades about 0.04 of its potential returns per unit of risk. Invest Capital Investment is currently generating about -0.06 per unit of risk. If you would invest  17,400  in Shell Pakistan on December 4, 2024 and sell it today you would earn a total of  1,101  from holding Shell Pakistan or generate 6.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Shell Pakistan  vs.  Invest Capital Investment

Shell Pakistan

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shell Pakistan are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Shell Pakistan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invest Capital Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invest Capital Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Shell Pakistan and Invest Capital

The main advantage of trading using opposite Shell Pakistan and Invest Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell Pakistan position performs unexpectedly, Invest Capital 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 Invest Capital will offset losses from the drop in Invest Capital's long position.

The idea behind Shell Pakistan and Invest Capital Investment 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.