Correlation Between Shell Plc and Gamma Communications

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

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

Diversification Opportunities for Shell Plc and Gamma Communications

-0.8

Correlation Coefficient

Shell Plc  Gamma Communications

Pay attention - limited upside

The 3 months correlation between Shell and Gamma is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shell plc and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC and Shell Plc 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 plc are associated (or correlated) with Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of Shell Plc i.e., Shell Plc and Gamma Communications go up and down completely randomly.

Pair Corralation between Shell Plc and Gamma Communications

Assuming the 90 days trading horizon Shell plc is expected to generate 0.69 times more return on investment than Gamma Communications. However, Shell plc is 1.45 times less risky than Gamma Communications. It trades about 0.07 of its potential returns per unit of risk. Gamma Communications PLC is currently generating about -0.03 per unit of risk. If you would invest  262,665  in Shell plc on December 4, 2024 and sell it today you would earn a total of  2,985  from holding Shell plc or generate 1.14% return on investment over 90 days.

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

Shell plc  vs.  Gamma Communications PLC

Shell plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shell plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Shell Plc is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Gamma Communications PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gamma Communications 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Shell Plc and Gamma Communications

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

The idea behind Shell plc and Gamma Communications 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.