Correlation Between Shell PLC and Azerion Group

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

By analyzing existing cross correlation between Shell PLC and Azerion Group NV, you can compare the effects of market volatilities on Shell PLC and Azerion Group 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 Azerion Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shell PLC and Azerion Group.

Diversification Opportunities for Shell PLC and Azerion Group

-0.28

Correlation Coefficient

Shell PLC  Azerion Group

Very good diversification

The 3 months correlation between Shell and Azerion is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC and Azerion Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azerion Group NV 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 Azerion Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azerion Group NV has no effect on the direction of Shell PLC i.e., Shell PLC and Azerion Group go up and down completely randomly.

Pair Corralation between Shell PLC and Azerion Group

Assuming the 90 days trading horizon Shell PLC is expected to generate 0.44 times more return on investment than Azerion Group. However, Shell PLC is 2.3 times less risky than Azerion Group. It trades about 0.0 of its potential returns per unit of risk. Azerion Group NV is currently generating about -0.07 per unit of risk. If you would invest  3,068  in Shell PLC on September 4, 2024 and sell it today you would lose (14.00) from holding Shell PLC or give up 0.46% of portfolio value over 90 days.

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

Shell PLC  vs.  Azerion Group NV

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 somewhat strong basic indicators, Shell PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Azerion Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azerion Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Shell PLC and Azerion Group

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

The idea behind Shell PLC and Azerion Group NV 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.